Expert: State gas line project faces fierce competition

Energy consultant says proposed pipeline will have to control costs

Posted: Thursday, September 17, 2009

ANCHORAGE - An energy consultant said a proposed North Slope natural gas pipeline will have to control costs to compete with supplies in the Lower 48.

The consultant from Calgary, Gerry Goobie of Purvin & Gertz Inc., spoke Tuesday at the Alaska Oil and Gas Congress being held this week in Anchorage.

He predicted "fierce" competition among gas suppliers. At today's prices, he said, it would be difficult for developers to raise the investment they need to start work on a new natural gas pipeline.

TransCanada Corp. and Denali Gas Pipeline are competing for a project to move natural gas from the North Slope to Alberta.

TransCanada Vice President Tony Palmer is more optimistic about the North Slope project's ability to compete. His company is spending millions to deliver a new cost estimate by the end of March.

The Anchorage Daily News reported the gas pipeline has been under consideration since the discovery of the Prudhoe Bay oil and gas field in the late 1960s. Rising natural gas prices early this decade revived interest.

Last year, the state awarded TransCanada, a Canadian gas pipeline company, a license to develop the North Slope pipeline. Exxon Mobil, the single biggest holder of gas reserves on the Slope, recently joined that project.

A competing project, Denali Gas Pipeline, was launched by the other two major gas leaseholders on the Slope, BP and Conoco Phillips. Palmer said he hopes the two projects will eventually merge.

The recession has dropped natural gas prices well below the level needed to make North Slope gas competitive.

Last week, natural gas prices were at their lowest level in nearly eight years, according to the federal Energy Information Administration. A key Lower 48 index priced gas at $3.25 per million BTU on Tuesday. The North Slope's gas would be competitive at prices of $6 to $8 per million BTU, according to the companies vying to build the gas line.

If Lower 48 suppliers can sell gas for roughly $3 per million BTU, "you have to be worried," Goobie said. But Palmer pointed out that North Slope gas developers will not need to seek capital from banks and other investors until 2014.



CONTACT US

  • Switchboard: 907-586-3740
  • Circulation and Delivery: 907-586-3740
  • Newsroom Fax: 907-586-3028
  • Business Fax: 907-586-9097
  • Accounts Receivable: 907-523-2230
  • View the Staff Directory
  • or Send feedback

ADVERTISING

SUBSCRIBER SERVICES

SOCIAL NETWORKING