ANCHORAGE - A 90-day 'open season' has begun for potential North Slope natural gas shippers to bid how much they'd pay to use a proposed pipeline.
The Anchorage Daily News reports this is a major test for the Alaska Pipeline Project of TransCanada and Exxon Mobil. It could determine whether investors will sink billions of dollars into a high-pressure pipeline to Valdez or Alberta, Canada.
"It is a very significant milestone," said Alaska Revenue Commissioner Pat Galvin.
The TransCanada vice president of Alaska development, Tony Palmer in Calgary, said the most likely result at the end of July will be bids loaded with conditions. That will start a period of negotiations.
"We will work through the fall and through Christmas to try to resolve these differences with customers," Palmer said.
TransCanada has an exclusive state license under the 2007 Alaska Gasline Inducement Act. The state could invest half a billion dollars in the project.
The state has already paid the Alaska Pipeline Project partners about $10 million. Other inducements are available to gas producers on the North Slope if they or their marketers sign contracts to put gas in the line.
Because the pipeline company isn't a public agency and open season is a commercial transaction loaded with trade secrets and proprietary financial information, Alaskans may not learn the results of the bidding period until the end of the year at the earliest.
An agreement would be filed with the Federal Energy Regulatory Commission, the nation's main pipeline regulator.
While only one company can be licensed under the Gasline Inducement Act and receive its inducements, nothing prevents other companies from developing a pipeline project. The two main North Slope oil producers, Conoco Phillips and BP, have a project they call Denali. A 90-day open season for Denali starts in July.
TransCanada said it would either build a line to Alberta, where Alaska gas will feed into an existing network connecting to Canada and the United States, or to Valdez, where the gas would be liquefied and transported by ship to the Lower 48 or to other countries. Either line would contain taps for spurs to utilities in Alaska.
The North Slope's natural gas was discovered along with the oil over 40 years ago. But gas is a much less lucrative business than oil. Since Prudhoe Bay started production 33 years ago, the gas that rises up through the oil wells mostly gets reinjected back underground to help scrub out more oil and to save for later.
Natural gas prices are now higher and global demand is expected to grow.
The pipeline would start with a 58-mile, 32-inch spur from Exxon's Point Thomson gas field east of Prudhoe Bay, and would include a multibillion-dollar gas treatment plant at Prudhoe. From Prudhoe to its destination, the line's diameter would be 48 inches with pipe walls more than an inch thick.
A 1,700-mile pipeline to Alberta would cost between $32 billion and $41 billion, said TransCanada's Palmer. An 803-mile line to Valdez would cost between $20 billion and $26 billion.