Coordinator: Gas pipeline is possible

It is still up in the air whether anybody in the world wants Alaska’s huge but remote reserves of natural gas, Federal Pipeline Coordinator Larry Persily told a Juneau audience Thursday.

But Alaskans have to come to grips with a new reality that low world gas prices are going to make it difficult to market Alaska’s gas, and make it worth less than had been hoped when it is sold.

“We are never going to get rich off gas like we are off oil,” Persily said.

Just a few years ago, Alaska was touting its plans for a natural gas pipeline to the Lower 48 on the national stage, but recently the focus has turned to exporting liquefied natural gas (LNG) directly from Alaskan ports.

“It seems as if we have fallen in love with it again, we do that from time to time,” he said.

Speaking before a Juneau World Affairs Council audience of about three dozen, Persily outlined some of the difficulties with making an LNG project happen.

He also itemized the problems with making an overland line through Canada work, some of which are the same and some different.

Then he said it needs to happen, and can happen, anyway.

It is not a bad thing that a natural gas pipeline hasn’t happened yet, he said, as the gas has been used to repressurize North Slope oil fields, but now the state needs to start selling it.

“It’s time to divert some of that gas to a pipeline to shop to customers somewhere, anywhere, around the world,” he said.

Being able to market the state’s natural gas would help oil company economics in Alaska, as well as spur exploration for more gas that is likely to find more oil as well.

The biggest problem any Alaska pipeline is facing, he said, is the distance between the gas and markets. That’s true whether it’s the connection into the North American natural gas pipeline system in Alberta or ice-free export ports in Valdez or elsewhere in southern Alaska.

Developing Alaska’s gas will mean the investment in building hundreds of miles of expensive pipeline, costs not facing Alaska’s competitors.

“That cost is what has kept Alaskans’ gas from leaving the North Slope for the last 40 years,” he said.

The shale gas revolution has made North American gas prices too low for a pipeline to be profitable right now, he said, but its is still the world’s biggest market and things may change.

Shale gas faces a host of uncertainties, as the process used to obtain it — hydraulic fracturing or fracking — has raised concerns ranging from water usage and water disposal to rapid depletion and even earthquake causation.

At the same time, conventionally produced gas is in decline and power producers are looking to replace polluting coal plants with clean-burning natural gas, he said.

And while Asian gas prices are high right now, total demand is still relatively low and numerous other countries are developing LNG liquefying at tidewater to serve those markets.

“The problem is everyone wants to sell into that market,” he said.

The world’s big oil and gas companies that would have to finance an Alaska gas pipeline have to figure out what the price will be in future years, but there’s a difficulty with that.

“Every long-term forecast you have ever seen or ever will see is wrong,” he said, suggesting no one knows for sure what gas prices will be in coming years.

Right now, Alaska has to weigh those various factors and decide which of the projects with committed in-state backers it should support.

The latest plan from many is to switch focus to an LNG plan, but Persily warned that Asian price premium would not always be there.

“Eventually supply will rebalance, it always does,” he said.

Though the committed partisans for various plans have yet to coalesce around a singe effort, Persily said both that and favorable markets are going to be needed to get Alaska a pipeline deal.

“It’s time for Alaska to get into the gas business,” he said.

• Contact reporter Pat Forgey at 523-2250 or at patrick.forgey@juneauempire.com.