TransCanada Expands Crude Pipeline Plans

As the plans for Alaskan Gas Pipeline come together, TransCanada is expanding their crude oil pipeline plans.

The proposals line will carry 750,000 bpd from Albert to refineries in Texas.

Doing the math - 750,000 bpd equals the consumption of 900 MMSCFD of Alaska gas ~ 20% of the planned 4,500 MMSCFD planned for the Alaska Gas Pipeline.

ConocoPhillips Hopes ExxonMobil will Join Denali Pipeline

Conoco CEO Jim Mulva indicates that Conoco is work towards the day when ExxonMobil joins the Alaska Gas Pipeline, dubbed "Denali Pipeline" by partners ConocoPhillips and BP.

When Exxon joins the project it will pretty much rule out other project possibilities and start driving the forward with the momentum of all three major North Slope Producers.

With all three North Slope Producers on board the final key to the project will be some sort of partnership with TransCanada.

Point Thomson Plan Rejected - Again

"We can't risk continued delays in development." says Kevin Banks, director of the Department of Natural Resources oil and gas division, in this Dallas Morning New article.

So rather than approve the plan and start the work - The State is complaining that there is no commitment and they head back to court. Probably the most flawed logic on record.

These are the same folks that are making the Alaska Gas Pipeline decisions for the State - Wow. Here's the link to the news release by the state.

ExxonMobil plans to appeal this latest decision.

Gas Price Headed to $12 - $14 /MMBTU

So says my favorite Okie - T. Boone Pickens.

Maybe high gas prices will drive Alaska and the North Slope Producers to get busy and start building the Alaska Gas Pipeline.

More on gas pricing by Wood Mackenzie.

Gas is still cheaper than oil. On a BTU basis gas at $21.87/MMBTU would be equal to $120/bbl oil.

LNG Demand Growth Predicted

Of course Tar Sand development is the big driver for Arctic gas development, but ExxonMobil sees demand for gas and LNG to increase substantially.

ConocoPhillips VP Speaks On Gas Value

Will Hussey, ConocoPhillips senior vice president for origination see the floor price of natural gas equal to $7/MMBTU.

In rough terms this indicates that ConocoPhillips values the 4,500,000,000 SCFD of Alaska natual gas at $11,340,000,000/year.

Assuming 1,200 SCF gas / barrel of tar sands produced the price of gas adds $8.40/barrel of $115 tar sand oil, or about 7%.

These figures give some context to the value and rate of return for the Denali Pipeline. The value of the gas looks like it will offset the cost of building the pipeline.

Quiet Week

Too quiet in fact. Not a peep out of the Alaskan politicians and Federal Pipeline Coordinator Drue Pearce.

There was one Alaska Gas Pipeline / Denali Pipeline gloom and doom article this week. A former Canadian regulator predicts a long road ahead for the Denali pipeline. It's probably true - it's going to take a lot of work and some political will to make this pipeline a reality.

Meanwhile the world marches on - LNG from Africa is docking in Texas and the price of oil is up around $115/bbl.

Over the long term high oil prices will drive tar sand development and construction of the Alaska gas pipeline.

Thanks for your poll votes - looks like the Denali Pipeline is a hit.

LNG Arrives at Freeport Texas

As a sign of the times take note - a new LNG port in Texas has just received a load of Nigerian LNG at the Cheniere Energy LNG facility in Texas.

It's important to note that while bickering and indecision grip the Alaskan Gas Pipeline debate - others will go half way around the world to develop LNG resources to supply lower 48 demand.

More LNG terminals in the Lower 48 are on the books as gas demand increases.

CB&I reports a LNG project in British Columbia today.

Alaska Gas & Canadian Tar Sands - Do the Math

After weeks and months of somewhat slow paced news on the AGIA gasline we finally got some real news when ConocoPhillips and BP announced plans for the "Denali" Gas Pipeline project.

The Governor continues to consider giving a $500,000,000 incentive to TransCanada to build the pipeline.

The Anchorage Daily News and the Fairbanks News-Miner are good sources for all the reaction to this historic announcement.

As this period of evaluation, estimation and engineering move forward here's some perspective on why the ConocoPhillips / BP Denali pipeline make good economic sense to these companies and their potential partners.

Production of Canadian Tar Sands requires 1,200 SCF (standard cubic feet) of natural gas per barrel. The 4.5 BCFD of Alaskan gas can be used to support 3.75 MMBPD of tar sand oil production. If oil is selling for $125/BBL when the gas starts flowing the Alaskan Gas will support gross revenues of $169 Billion annually.

Obviously there are lots of other cost associated with tar sand production, but this analysis show just how important Alaskan Gas is to North American oil production.

Here's how the projected Tar Sand projects stack up: ConocoPhillips is partnered with Encana, BP with Husky and ExxonMobil with Imperial - Collectively the North Slope producers can use 1,080 MMSCFD of their own gas captively to produce tar sand oil in Canada. The remaining 3,420 MMSCFD can be sold at a profit to other tar sands producers.

Even at this rate of North Slope Gas production the new projects will demand 1,000 MMSCFD more. This volume of gas could come from the Mackenzie Pipeline Project (1,200 MMSCFD).

Here's a summary of planned Tar Sands projects - You can see that the projects don't exceed the availability of North Slope gas plus Mackenzie Delta Gas.



After running these numbers the Denali Gas Pipeline announcement makes more sense.

By comparison TransCanada earns revenue by moving gas into the tar sands projects and by moving tar sand oil to the Lower 48 via projects like the Keystone Pipeline.

The TransCanada business model makes sense - But the North Slope Producers business model makes more sense. Which is why the State of Alaska and the Governor need to work with, not against the producers.

Tar Sand Projects Link and data source.

New Poll & Commenting Enabled

Let's here your view - New Poll posted--->

Also I enabled "Comments" for everyone (not just Google Account)

Comments welcome!

Denali Gas Pipeline

Summary: BP and ConocoPhillip - Ready to get the pipeline built. This is a good thing because the other options had pipe but no commitment to fill it with gas.

See the Denali Pipeline webpage here.

Here's a link to the project description.

And a good article by the Fairbanks News-Miner.

Pipeline company Enbridge wants a piece of the action.

ExxonMobil confirms that they have been invited to participate.

The Houston Chronicle reports that Shell is also interested in the project.

Alaska's Governor Sarah Pallin says the AGIA process is still on course and they will make the recommendation to the legislature on May 19th. The AGIA is currently considering only one proposal - the heavily conditioned proposal of TransCanada.

It may be too early to declare the TransCanada proposal dead - but it' difficult to see how the Governor could support giving $500,000,000 in incentives to built a pipeline with a strong counterproposal by the North Slope producers on the table.

BP Joins ConocoPhillips for "Denali Project"

From the Anchorage Daily News : "BP and Conoco executives in Anchorage said Tuesday their companies will form a new firm to pursue what they call the Denali project -- a pipeline costing more than $30 billion from the rich North Slope gas fields down the Alaska Highway and into Canada.

They said they'll spend $600 million in the next three years"

The story made the out-of-state news including the New York Times.

Well this is some fine news - maybe the producers have found their voice and want to get this thing built.

Feds Set Up New Arctic Gas Website

Federal Coordinator for Alaska Natural Gas Transportation Projects, Drue Pearce has a new website up and running - check it out here.

This photo of of Pearce and Governor Palin at the AGIA signing ceremony last year.

Pearce gave a long interview to ANWR.ORG, read it here.

Thanks for you poll votes!

If AGIA Fails - Eyes on the Prize

Today the Fairbanks Daily News-Miner posted a great editorial titled "If AGIA Fails"

The piece urges Governor Palin to move on quickly if/when AGIA fails.

Governor Palin has forged a political identity as the Anti-Big Oil candidate. It got her elected – Once. If AGIA fails, the Anti-Big Oil game won’t work a second time.

When the dust settles it sounds like Producers want fiscal certainty (a commitment by the state for gas tax rates) and the State wants a pipeline construction commitment.

Eyes on the Prize Governor

Poll Results - Don't Export Profits to Canada Eh?

My first poll indicates that folks want options other than exporting profits to Canada.

84% Voted AGAINST exporting Alaska Gas Pipeline profits to Canada.


This weeks Poll - Your views on the All Alaska LNG Option

AGIA Dead or New Life for LNG?

The AGIA process failed to produce any real competition. The All Alaska Pipeline, an LNG option didn't make it past the first round of completion.

The State was left with the TransCanada proposal that is burdened by numerous conditions.

Things are looking dim as the Alaska Daily News reports this week that the mood in Juneau is growing openly hostile.

Folks in Fairbanks are finding their voice and airing concerns about the high cost of fuel oil for home heating. Talk of a bullet line is gaining traction as the probable failure of AGIA takes hold.

But is the glass half full?

The Alaska Journal reports some cryptic remarks from Alaska Department of Natural Resources Commissioner Tom Irwin: "If the TransCanada proposal doesn't go to the Legislature the state will stay within the AGIA process and work on LNG, or liquid natural gas, options".

It's not clear how the AGIA goes into overtime, but it's good to hear that the State is not 100% joined at the hip to TransCanada. For now let's hope the glass is half full and that reason prevails.