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Federal Coordinator: No Clear Front-Runner in Alaska Pipe Race

July 21, 2008
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While Denali and TransCanada are the most notable Alaska gasline projects, there's no clear front-runner at this stage of the game, the federal coordinator for Alaska Natural Gas Transportation Projects said last Monday.

"I don't think you can call one ahead or behind," Drue Pearce told reporters during a Platts Energy Podium in Washington, DC. "Clearly the Denali project is moving forward. TransCanada, however, had completed their right-of-way [work]," she said.

"So it's honestly hard to say who's ahead on the U.S. side of the border. On the Canadian side of the border, TransCanada, of course, would clearly tell you they're ahead."

The Denali project, which is sponsored by BP and ConocoPhillips, in June was approved to participate in the Federal Energy Regulatory Commission's pre-filing review process, which allows a review of the project to begin prior to receipt of an application (see NGI, June 23). TransCanada is waiting for the Alaska legislature to grant it a license before coming to FERC.

Pearce said she agreed with TransCanada's decision to hold off filing at the Commission. If the company had gone to FERC first, "there certainly are some [Alaska] legislators that would have said, 'They're doing it before we've even licensed them...They're far too sure of themselves and we're going to teach them,'" she noted.

"I think we've got the momentum" now to build a pipeline from Alaska's North Slope to the Lower 48 states, Pearce said. "I do believe that we're closer than we've been in 30 years," she said, adding that she was "very optimistic that now is the time to get it built."

Denali's backers are committed to spending hundreds of millions of dollars to get to a point of design and open season, while the Alaska legislature is nearing a vote on whether to grant TransCanada a license to build a long-line pipeline under the Alaska Gasline Inducement Act (AGIA). TransCanada was the only company that agreed to the requirements spelled out in the AGIA.

Denali, which plans to file its FERC application in August 2011, intends to construct a 48- to 52-inch diameter pipeline between the Alaska North Slope and Alberta capable of transporting 4 Bcf/d. The Denali partners also plan to construct a gas treatment plant on the North Slope.

TransCanada proposes to build a 4.5 Bcf/d, 48-inch diameter, mostly buried pipeline running 1,715 miles from a gas treatment plant at Prudhoe Bay on the North Slope to the Alberta Hub in Canada. The Alaska section would be about 750 miles long with six compressor stations at start-up and five gas delivery points in Alaska. The application includes an expansion capability of up to 5.9 Bcf/d. Further expansions would include a combination of additional compression and looping (see NGI, May 26).

The Denali camp has said it is proceeding with its project regardless whether TransCanada is awarded a license, in effect putting the two projects in a race.

Pearce noted that there's room only for one Alaska pipeline, saying, "there's just not enough gas discovered to date for two pipelines." Realistically she said she believes an Alaska pipeline can be built and in operation by 2019. House Democrats have said they may offer legislation that would expedite the construction of the line before leaving for the August recess (see NGI, July 14). Pearce said she is eager to see what they will propose.

The biggest obstacle to the $30 billion-plus pipeline has not changed. "It's the cost and risk of cost overruns and what they could do to the tariff," she said.

Ownership of the gas-rich Point Thomson field, which holds an estimated 8.5 Tcf of natural gas, is "very important" to the Denali pipeline project, according to Pearce. Other companies are "clearly interested" in ownership of Point Thomson, including Shell and Anadarko Petroleum, she said.

The "frontier in Alaska is again looking like it has good potential," Pearce noted. The state is seeing interest in the Beaufort Sea and the Chukchi Sea from not only majors (Shell, ConocoPhillips and others) but also from independents. In February the Interior Department held its first federal oil and gas lease sale in the Chukchi Sea since 1991. The Chukchi shelf is believed to hold oil and gas reserves of as much as 30 billion boe.

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