Gas producers drop idea of shipping capacity auction

Posted: Monday, January 21, 2002

FAIRBANKS - The major North Slope gas producers have scrapped an idea to auction shipping capacity in the proposed pipeline to the Lower 48.

The development is yet another indication of the producers' dwindling enthusiasm for the project.

Dave MacDowell, spokesman for the Alaska Gas Producers' Team, announced the news this week to the Legislature's Joint Committee on Natural Gas Pipelines, the Fairbanks Daily News-Miner reported.

"We have no plans to hold an open season in 2002," MacDowell told lawmakers.

A shipping capacity auction, called an open season, is common when pipeline construction is being considered. Gas marketing firms bid on the capacity the pipeline is expected to have. That shows companies considering pipeline construction how much serious interest exists.

The commitments are binding unless voided by circumstances, such as the pipeline not being built.

Just months ago, the consortium of producer companies -- BP, Exxon Mobil and Phillips Petroleum -- informed the state that they might hold such an open season in early 2002 for the proposed pipeline from the North Slope to the Lower 48.

That sparked the interest of some gas marketing firms in purchasing some of the state's share of the natural gas reserves on the North Slope. The state is entitled to 12.5 percent of the natural gas produced on state lands on the North Slope. The state can take its share in cash or in actual gas.

But before gas shippers bid on long-term contracts to use the pipeline, they want to have guaranteed access to natural gas reserves.

Given the interest, the state announced in December it would start taking bids so that any contracts could be approved by the Legislature before the open season was held.

Alaska Department of Natural Resources officials said this week that the state's consideration of possible gas sales will continue even though there is no longer an open season expected anytime soon.

Bonnie Robson, deputy director of the Alaska Division of Oil and Gas, told lawmakers that the producers did not offer an absolute guarantee that there will not be an open season in 2002.

Robson said an interested group of national pipeline companies is meeting with the producers. She said those talks could move the project forward.

The North Slope gas producers have completed $100 million in studies to determine whether they believe a pipeline from the North Slope is economically feasible and what route it should take.

Last summer the producers' team said preliminary data indicated that the project would not bring enough revenue for them.

The final results of those studies have been forwarded to BP, Exxon Mobil and Phillips Petroleum for individual decisions.

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