While a TransCanada Corp. executive was assuring Alaska legislators that the current price of natural gas was not going to undermine the multi-billion-dollar Alaska gas pipeline project, producers BP Energy and ConocoPhillips warned a meeting of Alaska industrials that a host of factors, including lower natural gas prices, could affect pipeline prospects.
“The day to day swings in prices are not going to affect this project;” said TransCanada Vice President Tony Palmer. “We take a long view.” Palmer is directing the TransCanada project, one of two competing pipeline proposals to carry Alaskan gas to Canada and the Lower 48 states. The gas would not hit the market until nine years from now, and the gas would continue to flow for between 25 and 50 years, he told members of the Alaska Senate Resources Committee on Monday.
But long-term forecasts don’t paint a much better picture, Brian Frank, president of BP Energy, told an Alaska Alliance meeting of business leaders in the state last Friday. Frank pointed to major competitors for Alaskan gas, the unexpected surge in North American shale gas production and the growing capacity of liquefied natural gas (LNG) receiving terminals, none of which can be termed a short-term event. Gas from Alaska “will have to compete at the margin with unconventional gas and imported LNG.”
John Carrig, ConocoPhillips president and COO, also addressing the alliance meeting, agreed that besides the current global economic crisis, low and volatile commodity prices, energy and climate legislation, fiscal uncertainties and access to resources all would have an impact on the project. There will have to be collaboration to resolve major policy issues threatening the North Slope gas pipeline and Chukchi Sea exploration, Carrig said.
ConocoPhillips, another major Alaskan producer and BP are partners in the Denali Pipeline project, competing against TransCanada to carry the gas south.
Costs are key, Frank said, advising that after rising from 2004 through 2008, some construction costs are starting to head down. BP will be conducting a new cost estimate over the next 12 months. “A year from now we should have a new outlook on price. Hopefully costs will continue to fall.” The projected cost of the pipeline has gone from $26 billion in 2004 to $30 billion by the most recent calculation.
Meanwhile, TransCanada plans an open season for gas to fill its pipeline in mid-2010. BP and ConocoPhillips, along with ExxonMobil, produce much of the available gas, thus holding the keys to financing a pipeline project.
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