Thanks to Lower 48 shale gas supply growth, it's too late for a pipeline to carry Alaska North Slope gas to market -- but it may be able to catch a boat out of the frozen tundra to hotter markets in Asia, Credit Suisse analyst Teri Viswanath said in a note Tuesday.
"...[E]ven if the [proposed Lower 48] pipeline projects broke ground today, delivery to the Lower 48 states would occur almost a decade later and would require a $6-7/MMBtu price environment," Viswanath wrote. "...[T]he rapid expansion of the Lower 48 resource base has probably priced these transportation projects out of the market."
However, liquefying Alaskan gas and shipping it to high-priced Asian markets is a potentially attractive option, Viswanath said. She's not alone. In an editorial in the Fairbanks Daily News-Miner last Saturday former Alaska gubernatorial candidate Bill Walker described efforts to send Alaska gas through Canada to the Lower 48 as a waste of time.
Walker and others have long sought a pipeline from the North Slope to Valdez, from where liquefied natural gas (LNG) could be exported, with a spur line to gas-starved Southcentral Alaska. A project was first approved by the Federal Energy Regulatory Commission in 1995 for Yukon Pacific Corp. LP. While the authorization expired in 2010, FERC said at the time it could be revived with the filing of additional information (see Daily GPI, May 24, 2010; March 30, 1998; Sept. 5, 2006).
"...[R]evenue into state coffers and cheap energy are not enough for a prosperous economy," Walker said in his opinion piece. "It is the gas liquids that will transition Alaska's economy with value-added manufacturing jobs."
However, he said the state risks getting shut out of more lucrative global gas markets as LNG takes hold. "...LNG projects around the world are being developed to capitalize on the premium Asian markets," he wrote. "These markets represent Alaska's last and best opportunity. Once they are fully subscribed, the door will shut on Alaska's ability to build the big [in-state] line that would ignite our economy and make it cost-effective to deliver gas to Alaskans."
Viswanath noted that leaders in the growing global LNG market are Europe and non-Organisation for Economic Co-operation and Development Asia "where the share of global LNG demand is expected to grow to 42% and 74% by 2030, respectively.
"As pricing in these markets is expected to maintain its relationship to global oil prices, the premiums these markets provide should help capture the lion's share of LNG volumes, creating an interesting option for Alaskan natural gas."
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