Producers Consider Non-Stop Route from Prudhoe Bay to Chicago

A direct, express pipeline stretching all the way to Chicago from Prudhoe Bay is among the options being considered for tapping Arctic natural gas by the three principal production companies operating in Alaska. The mammoth possibility was disclosed in the Canadian gas capital of Calgary, to a conference of the Canadian Energy Research Institute, by the North American Natural Gas Pipeline Group.

The group --- a consortium of BP Plc, ExxonMobil Corp. and Phillips Petroleum Co. --- reported that while a route selection decision has yet to be made, Chicago stands out as the logical destination for deliveries to enter lower 48 markets. The logical path is the direct line followed by Alliance Pipeline to Chicago from northeastern British Columbia. Group project manager John Carruthers said "we need to make a project that's fundamentally sound over the longer term." That spells the biggest possible volumes of gas deliveries in order to spread costs thin over a project informally estimated to cost in the US$10 billion range. And that suggests building a new pipeline across Canada and into the Middle West because Canadian pipelines that would connect with new lines from the far north would not have the capacity to deliver the additional volumes to U.S. markets.

The Alaskan group's preliminary targets call for production at a rate of three to five Bcf/d. Alliance Pipeline officials report that in the five months since their line opened, it has filled up --- and more. The new Alliance was installed with initial capacity to take up to 1.5 Bcf/d, in order to guarantee performance on firm-service contracts for 1.325 Bcf/d. The extra space has been snapped up by producers and users of northern B.C. and Alberta gas to the point where traffic reached a peak of 1.65 Bcf/d in March, a rush made possible by taking advantage of favourable temperature, pressure and operating conditions. As well as the U.S., gas travelling via Alliance has been going to central Canadian markets on the new Vector Pipeline between Chicago and southern Ontario.

Alliance spokesman Jay Godfrey confirmed that the new line's capacity could be raised to 2.4 Bcf/d with additions of compressor power. But the extra 800 MMcf/d would fall well short of projected Alaskan traffic, creating a need to lay more pipe. The Alaskan group said it intends to open discussions with Alliance soon on expansion possibilities. They could include laying an additional line in the Alliance right-of-way or widening it into a transportation corridor, potentially with parallel pipelines under separate ownership.

While the Alaskan producers continue their US$75-million study, which includes a 15-employee Calgary office, counterparts active in the Canadian Arctic are also moving ahead on a separate review. Gulf Canada Resources, Imperial Oil, Shell Canada and Exxon Mobil are examining prospects for a production development on the Mackenzie Delta and a pipeline south through the Mackenzie Valley. Both groups have targets of selecting a route this year and proceeding promptly into regulatory filings.

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