Sunday, March 30, 2008

The Need for Alaskan Gas & The Case for a ConocoPhillips Natural Gas Pipeline

Production of a barrel of Canadian Tar Sand synthetic crude oil consumes about 1,200 cubic feet of natural gas.

This means that 4.5 BCFD of Alaskan Natural Gas could process Canadian Tar Sands and yield 3.75 MMBPD of synthetic crude oil.

One of the best examples of the link between Alaskan natural gas and Canadian Tar Sands is ConocoPhillips.

ConocoPhillips can produce about 1/2 of the Alaskan Natural gas or about 2 BCFD.

The ConocoPhillips - Encana joint venture seeks to produce about 0.4 to 0.6 MMBPD of tar sand product depending which story you read. That would consume about 16% of the Alaskan natural gas production.

Heavy oil from Canada can replace heavy oil from Venezuela in ConocoPhillips Lower 48 refineries.

The heavy oil from Canada will reach ConocoPhillips refineries by way of the Keystone Pipeline, a joint venture with TransCanada.

The business case for a ConocoPhillips led Alaska Gas Pipeline is compelling. For ConocoPhillips and their partners the project is a Win-Win-Win-Win.

Win #1 Monetization of stranded Alaskan Natural Gas Resources.
Win #2
Natural Gas feedstock for Tar Sand Oil production provided at cost.
Win #3
Secure heavy oil feedstock for existing refineries.
Win #4
Sell Alaskan natural gas to other Tar Sand Oil Producers at a profit.

I'm presenting my interpretation of ConocoPhillips business case for an Alaskan Natural Gas Pipeline to show the contrast to the TransCanada business case.

TransCanada wants a lot of government support (including a $500,000,000 inducement from Alaska) to build a pipeline and receive a fixed, predictable profits for transporting Alaskan Gas to Alberta. The other 49 U.S. States will be asked to chip in and buy gas to fill the pipeline when the U.S. Government becomes the "Bridge Shipper"

It's a sweet deal for TransCanada if they can pull it off.

Here's the economics lesson for Alaskans - There's a fixed amount of income that will come from producing Alaskan Natural Gas - Whatever cost are paid to Canadians reduces the amount that should go to Alaskans (Americans) as jobs, profits, reinvestment in oil & gas development, and tax revenue.

No matter how much folks enjoy badmouthing the Producers - High profits for TransCanada is not the optimum business case for the producers, Alaskans, or the Lower 48.

Photos from: Dirty Oil , Technology Review By Katherine Bourzac.
Pipe Photo from Grand Forks Herald


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