Wednesday, May 28, 2008

State of Alaska Provides Details of Gas Line Analysis

The State of Alaska has released a lengthy document titled "Written Findings and Determination by the Commissioners of Natural Resources and Revenue for Issuance of a License under the Alaska Gasline Inducement Act (AGIA)"

Appendix G1 covers NPV (Net Present Value) Analysis

Appendix K should make for good reading, it's titled "Expected Returns and Approval Economics"

Terminology warning - TransCANADA is now called "TC".


custerwilson said...

Yeah, but NPV does NOT subtract the Prudhoe OIL LOST
... assuming that Oil does as they assume Gas will : DOUBLE, and STAY THAT HIGH FOREVER, then we Must assume at LEAST the Alaska Dept. of Revenue estimate of 300 million barrels lost before the pipe shuts down -- so: 770 as we know Icebreaker tankers can take the rest -- times the same TWICE CURRENT PRICE, FOREVER =
$260/barrel x 300 m. = $78-200 Billion. ( With current technology: i.e. 6% yearly Oil yearly declines, vz 10%, after Gas withdrawls depressure the Oil ). Subtract from Alaska's $261 B. Gain:

= TRUE NET only $61 Billion or:
$1.20 per Thousand cubic feet.

... But tech always improves.
If in 2025+ we can reduce declines to 3%, not 6%, we lose 1300 m. barrels = $338 Billion = a net LOSS, i.e. PAYMENT, by Alaska, of $87 Billion.

That wipes out the Permanent Fund.

A Special Tax on Alaskans can collect the rest ... IF you are lucky. After all, DESTROYING the Oil is like Vandalism ... courts award TRIPLE DAMAGES for that!

AK Engineer said...

Good point. The Oil / Gas production trade offs decisions really should be handled by the producers. I'm thinking that ConocoPhillips balances future oil lost in AK with future tar sand oil produced in Canada.

The ConocoPhillips revenue numbers look better when you assume the AK gas will be converted enable higher tar sand production.

In that scenario Alaska is the production and revenue loser - I'm not sure the leadership understands the full equation.