U.S. dependence on Canadian gas has quadrupled since the 1970sand is expected to grow even further over the next decade, butthere’s no danger the country will be to the domestic gas marketwhat the Middle East has come to mean to the U.S. crude oil market,a Canadian pipeline executive said.
“No, I don’t think we’ll be as dominant a supplier,” said JackCrawford, senior vice president for public government andregulatory affairs with Alliance Pipeline, which is based inCalgary. “First, we’re just not that big. Obviously, we’re a stronggas producer, but we’re not on the order of magnitude of a MiddleEast. The second reason is our gas supply growth is expandingnorthward. At some point, the infrastructure will get to the pointwhere it’s within reach of Alaska,” where the U.S. has “hugereserves” of natural gas.
He noted that one of three schemes being considered to transportAlaska North Slope gas to the U.S. market “potentially” couldinvolve Alliance. Crawford said the pipeline wasn’t “actively”pursing this angle at this time, given that it’s still “fullyoccupied” with the construction of the Canada-to-Chicago Allianceproject, which is targeted to begin operation “full steam” nextOctober.
Speaking at the winter meeting of the National Association ofRegulatory Utility Commissioners (NARUC) in Washington D.C. earlierthis week, he said he doubted that Alliance would be immediatelyaffected by the FERC’s hold-up of projects that would transportsome of Alliance’s 1.3 Bcf/d of gas from Chicago to East Coastmarkets.
“It may have a longer-term effect, but it won’t have ashort-term effect because our capacity is essentially sold out for[the next] 15 years,” Crawford told NGI. If the take-away projectsaren’t certificated, however, “it may delay expansions” of theAlliance system in the future. Alliance is counting on VectorPipeline, which has been certificated and is under construction, tohandle much of the overflow.
As for the Alliance pipeline itself, which has four sponsors,Crawford said it has incurred some construction overruns. But theyhave been “very localized,” occurring mostly in North Dakota, andhave been “relatively modest” in the amount. The sponsors includeCoastal Corp., Williams, Enbridge Inc. (formerly IPL Energy) andthe Fort Chicago Energy Partners.
The pipeline just recently began to put gas into the system,about 200 MMcf, he noted. That’s just the first injection of about8 Bcf of natural gas that Alliance plans to put in between now andnext October, when it begins operation.
Crawford estimated that Alliance still has about 120 miles toconstruct on the U.S. side of its mainline, and about 180 milesmore to go on the Canadian side. But there’s still “considerablymore work to be done” on the lateral portion of its receipt system.
Crawford contends that Alliance has been able to keep to itsconstruction schedule because it, in conjunction with FERC, agreedto third-party monitoring in the field. “FERC had an on-sitepresence in each of our construction spreads. Rather than have totake route deviations or right-of-way variations all the way backto Washington to get approval….., part of that process wasdelegated to this third-party monitor in the field.” As a result,Alliance has gotten more “rapid approval” of routine decisions, andthe Commission has gotten better compliance, he said.
Crawford said the ‘biggest task” by far in constructing Alliance”has been that of dealing with landowners.” He estimated thepipeline has had to address the concerns of “something in the orderof 6,000 landowners” on the U.S. and Canadian sides. But he notedthat Alliance was able to reach voluntary agreements with all butless than 1% of the landowners.
Once Alliance is operating, it’s expected that Canadian gasexports to the U.S. market will rise to between 10 Bcf/d and 12Bcf/d in early 2001, which translates to about 4-4.5 Tcf per year.That’s compared to last October’s gas export volumes of 8.9 Bcf/d.But to fully appreciate the growth in Canada’s export volumes, it’snecessary to go back to 1981 — when they were about a half of aTcf annually.
There isn’t likely to be a let-up in Canada’s growth. ToddPersells, assistant vice president for project development andmarketing at ANR Pipeline, said forecasts for 15 years out indicateCanadian exports will grow by 25%, and Canadian production willrise by 33%.
It’s estimated Canada has “ultimate marketable potential” gasreserves of 662 Tcf, almost half of which (350 Tcf) derive from theWestern Canadian Sedimentary Basin — where the Alliance Pipelineoriginates. The estimates are from the Canadian Gas PotentialCommittee and the National Energy Board.
In the past three to four years, Canadian producers have beenadding to reserves at a rate of 4 Tcf per year. “This has been dueto mostly offshore and above-average drilling activities in theWestern Canadian Sedimentary Basin,” said Neil McCrank, chair ofthe Alberta Energy Utilities Board, who also spoke at the NARUCmeeting.
Well completions in Alberta — which account for 83% of allCanadian production — have “increased significantly” since 1992,he noted, and the trend is expected to continue in the foreseeablefuture. In 1999 in Alberta alone, 5,860 successful wells weredrilled, an increase of some 30% over the previous year, McCranknoted.
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