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BG Takes Alaska North Slope E&P Position

BG Alaska E&P Inc. is entering the Foothills area of Alaska's North Slope through a participation agreement with Anadarko Petroleum Corp. and Petro-Canada (Alaska) Inc. The BG Group subsidiary is taking a one-third equity share of 2.1 million acres; Anadarko will be the operator.

The move is intended to expand BG Group's exploration and production holdings and give it some U.S. natural gas production, said spokesman David Keane. Exploration and production accounts for nearly 75% of BG Group's business based on 2004 capital expenditures. Besides Canada, on the E&P side BG is active in Trinidad, Bolivia, the United Kingdom, Tunisia, Egypt, Kazakhstan, India and Thailand.

"This agreement builds on our existing North American E&P business in Canada and creates the potential for increasing BG's natural gas supply position into the U.S. gas market, which is underpinned by our LNG importation business," said Martin Houston, BG North American, Caribbean and LNG managing director. "We will manage these assets from our office in Calgary, leveraging the technical capabilities we have developed since we commenced our operations there."

In Canada BG Group holds nearly 875,000 net acres, 811,297 of it undeveloped oil and gas acreage. This follows a May 2005 acquisition in the central Mackenzie Valley area of the Northwest Territories. Production is sold into the pipeline grid for transport to Canadian and U.S. markets. Additionally, BG is active in British Columbia with 60 wells and western Alberta with 13 wells. The company also holds a 50% working interest in a southwestern Alberta discovery made with Shell Canada in 2003. BG began drilling in Canada in May 2004.

Keane said BG and its partners hope to be producing gas from the North Slope by early 2015, which is when they expect an Alaska gas pipeline to be finished. BG expects the proposed Alaska gas pipeline project -- contemplated by producers BP, ExxonMobil and ConocoPhillips -- to be the one that moves forward, as opposed to the Mackenzie Pipeline Project or the Trans-Alaska Gas System (TAGS) and LNG project. However, Keane said that BG -- a major LNG player and holder of all of the capacity rights at the LNG terminal in Lake Charles, LA -- was not ruling out the possibility of LNG transport of Alaskan gas.

While a pipeline from the North Slope is bogged down in negotiations between major Alaska producers and the state, the TAGS proposal would appear to be benefiting, at least from a relative economic perspective. A Federal Energy Regulatory Commission report submitted to Congress last week said the cost of a North Slope pipeline has spiraled upward on rising steel costs (see Daily GPI, Feb. 3).

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