Reports out of Alaska indicate that several foreign energy companies are interested in building a major system for the transportation of Alaska North Slope natural gas, a federal government coordinator for the project said.
“Rumors abound that companies,” such as Spain’s Repsol, BG Group plc and Chinese interests, “have been asking questions that would indicate their interest,” said Drue Pearce, federal coordinator for Alaska Natural Gas Transportation Projects.
“Consulting, engineering, construction and other companies — large and small — from around the world are trying to figure out where they might hitch their wagons,” she noted. “The Alaska rumor mill is at peak pitch at the moment and will likely continue…at that level until the Nov. 30 deadline when we all see who came to the governor’s party.”
After the new Nov. 30 deadline, commissioners of the state’s Departments of Natural Resources and Revenue will review the proposals to determine which ones meet the requirements of Gov. Sarah Palin’s Alaska Gasline Inducement Act (AGIA). The state is expected to select a project application in January-February 2008, and then forward it to the state legislature for approval.
Some of the foreign companies are interested in building a pipeline to transport North Slope natural gas to the Port of Valdez, AK, where it could be liquefied and shipped by tankers to markets overseas, Pearce said.
As for U.S. and Canadian companies, “Enbridge has said they will not be applying” under Palin’s AGIA to build a natural gas transportation system, she noted. The major North Slope producers, ExxonMobil, ConocoPhillips and BP, “did not support AGIA during the legislative process and are not expected to submit conforming applications.”
During the term of former Alaska Gov. Frank Murkowski, the three producers had agreed on a 3,600-mile pipeline project that would have delivered 4.5 Bcf/d of gas from the North Slope to U.S. Midwest markets. But Palin’s AGIA has put that project in limbo.
Others have expressed “great interest,” Pearce said. “The [Alaska Gasline] Port Authority and TransCanada were early players during the former governor’s [Murkowski’s] negotiations. MidAmerican [Energy] came to the table during the legislative session.”
She noted that “it’s been difficult to…plan for the prefiling process and beyond when we don’t know who the sponsor will be nor what route or type project to expect.”
Whatever project is ultimately chosen — be it a long-line pipeline from the North Slope to U.S. Midwest markets, a combination pipeline and liquefied natural gas (LNG) terminal or other — Pearce noted that Alaska has a lot of natural gas to tap. It is estimated that the state has discovered conventional resources of 35 Tcf onshore, undiscovered conventional resources of 72 Tcf onshore and 97 Tcf offshore; and 44 Tcf of coalbed gas.
Despite the abundance of natural gas, there are skeptics who believe that an Alaska transportation system will never be built. Efforts to build a pipeline from Alaska to the Lower 48 states has been under way since the early 1970s, but the mammoth project has never been realized due to the staggering costs that might not be recovered in the price of gas, regulatory hurdles, stiff environmental requirements and the ongoing debate over what form the project should take, what the route should be and who should be involved in the construction.
Talk about the project revived in recent years as the price of natural gas has gone up, making the economics appear more attractive. However, the estimated cost of the project also has gone up, making it a very large risk for whomever ultimately builds it..
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