Plenty of political wrangling remains before an agreement is struck to commercialize Alaska’s North Slope gas reserves with transport to the Lower 48 (see NGI, Sept. 11). However, getting Alaska gas to Canada and then the United States is something TransCanada Corp. has been thinking about for a long time. And the company has some definite ideas about what it would like its role to be in the effort.

TransCanada CEO Harold Kvisle told NGI that his company is willing to cede the rights it claims to hold on construction of the Alaska portion of the line in exchange for participation in the overall pipeline project to reach the Lower 48. Kvisle explained that during the early 1990s TransCanada acquired rights to build a pipeline through Alaska from a handful of North American companies that were willing to sell their interests for tax purposes.

“TransCanada picked up those interests not because we thought it was important to buy them so we had a hammerlock on the project; we thought it was important to keep that mechanism alive and in place,” Kvisle said. He said the company was agreeable when the U.S. government and the producers backing the gasline (BP, ExxonMobil and ConocoPhillips) approached it about legislation to expedite the pipeline.

“We said, ‘We understand why you want to do that. We will not stand in the way of that and we will support it,’ knowing full well it would mean that our rights within Alaska would be worth less if enabling legislation came in. But also, it conveyed that we recognized that without strong producer support and strong producer involvement in the project, it’s unlikely this thing is going to go ahead.”

Additionally, Kvisle said TransCanada has told Alaska and the producers that it would give them “all of the technical information, all of the right-of-way, all of the environmental studies,” the company has on an Alaska gasline route in exchange for participation in the overall project, even just on the Canadian side. “Everything that we’ve done in the state of Alaska, we would like to turn it over to them. It would significantly help them and enable them to move forward with the project sooner rather than later.”

TransCanada has already worked with Alaska producers ConocoPhillips and ExxonMobil in Canada’s Mackenzie Valley where another pipeline project is bogged down in regulatory and other issues (see related story).

TransCanada would be willing to take a leadership role in an Alaska pipeline project and put up “most of the money,” Kvisle said. However, the company has found itself largely excluded from pipeline negotiations between the producer trio and Alaska, and TransCanada has promised to fight for the right to build the Canadian portion of an Alaska gasline (see NGI, July 24).

“We have invested several billion dollars to sustain this project in Canada,” said Kvisle. “We’ve built facilities; we hold the right-of-way. We’ve got the fundamental government approval to build the Canadian section. The go/no-go decision has been taken.”

Kvisle said TransCanada is willing to collaborate on the Canadian leg of an Alaska gasline, starting with extension and tie-in of TransCanada’s Alberta system in the far reaches of Canada’s Western Sedimentary Basin. “We predict by the year 2015 our spare capacity in the Alberta system will probably be enough or close to enough to accommodate all of the Alaska gas,” Kvisle said. “No one else can offer [the producers] that.”

Additionally, Kvisle promised that the toll to get through Alberta would be “attractive.” And all routes out of Alberta lead to TransCanada as the company has four takeaway options from Alberta that can move gas to the Northwest and California, Chicago, Michigan and the Great Lakes region, as well as eastern Canadian and U.S. markets. “No one else can offer them that,” said Kvisle.

“We’re approaching all of this with a lot to offer,” he said. “The press often characterizes us as demanding this or demanding that, or being in a contest with Enbridge [Energy Co. Inc.]. None of that is correct… We’ve already had extensive discussions with the producers on how the gas gets from Alberta to North American markets, and we look forward to really getting into some detailed discussions about how we can use the assets that we have to expedite the project through the Yukon and Northern BC.”

If/when and however Alaska gas makes its way to Canada and the Lower 48 there will be plenty of room for it, Kvisle said. The North American market is about 70 Bcf/d, he said, with an annual production decline rate of about 25% per year. “Say it was 20%, you’d end up with 13 or 14 Bcf/d of new production required every year just to offset annual declines.”

The approximate 4-4.5 Bcf/d expected from Alaska won’t be all that much more difficult for markets to digest than Kvisle expects the anticipated 1 Bcf/d of production from the Mackenzie Delta to be. He recalled the “surprise” Bcf/d that was thrown off by Apache’s Ladyfern discovery in British Columbia in 2000 (see NGI, Sept. 18, 2000). “Neither when it came into the market nor when it left did it have any evident impact on North American supply and demand,” he said. “The market is big enough and liquid enough and robust enough that a Bcf/d doesn’t have that impact.

“Alaska would have a little bit more dislocation because it’s four times that much. But, you know, it would be a one-time injection of 4 Bcf/d, and maybe we’d spread it out over a couple of years by starting that pipeline flowing 2 Bcf/d and then a year later starting all the compression to get it up to 4 or 4 1/2. There are a variety of ways to do that.”

By the time Alaska gas could arrive in the states there will be about 5 Bcf/d of new LNG supply coming ashore. “And in the worst case the Alaska gas pushes the price down and backs that LNG out of the North American market,” said Kvisle, whose company also has its finger in LNG with its Cacouna (see NGI, Oct. 3, 2005) and Broadwater (see NGI, Feb. 6) projects.

Kvisle predicts that western Canada’s gas consumption will rise significantly in coming years, not just for oil sands production but also for more gas-fired power generation and economic growth. So the amount of exports available from western Canada will be decreasing, and Kvisle said he doesn’t expect any significant ramp-up in western Canadian production.

At the other end of TransCanada’s North American system, eastern U.S. markets will be increasingly fed by LNG imports. “We don’t necessarily think that’s the end market that Alberta or Alaska gas will flow to, but we do see steady growth in the Chicago market. And we think that Alberta gas is a very logical source of supply for California, and as such, Alaska gas that flows through Alberta would also be a logical match for that.”

While some Canadians, particularly oil sands producers and industrial gas consumers, would like to see a reduction in Canadian gas exports to the United States (see NGI, Sept. 11), Kvisle isn’t one of them.

“I don’t think there are very many serious voices in Canada that say we should not be exporting to the United States. You often hear that, though, when the unfairness of the mad cow situation or the unfairness of the lumber dispute really gets Canadians grumpy. Then you’ll hear somebody say, ‘Why don’t we shut off the gas.'”

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