Wednesday, December 30, 2009

"Stand Alone" Pipeline

Funny name but the "Stand Alone" pipeline is worth keeping an eye on. Here's a link to the Army Corps of Engineers Environmental Impact Statement (EIS) website, and a link to a related news blurb.

Check out the 133 page project description (LINK).

Grasping at straws or the best bet? Comments appreciated.

Joint Review Panel Report - ISSUED !

Today the Canadians will issue and post the "The Joint Review Panel assessing the environmental and socio-economic impacts of the proposed Mackenzie Gas Project"

According to the media advisory the report will be posted here (LINK).

How does this relate to the Alaska Gas Pipeline? It's a model of the hurdles that await the Alaska Pipeline. Bud Fackrell (Denali Pipeline President) recently said he thought the Mackenzie Pipeline would start before the Alaska Gas Pipeline - we'll see if he's right.


Saturday, December 26, 2009

Cook Inlet: "Running out of cheap gas"

The DOG Cook Inlet Gas study has been released (LINK). Quote from Director Kevin Banks cover letter:

Consumers relying upon Cook Inlet natural gas to meet their energy needs should know that while there is no need to panic, there is also no time to waste. Although it is apparent that sufficient reserves remain to provide for railbelt needs for the coming decade or more, the cost of providing energy to these same consumers is likely to rise. ...the basin is not running out of gas but it could well be running out of cheap gas. Investments in storage development, reserves replacement and pipeline infrastructure will place additional upward pressure on consumer energy prices.
Remain calm! All is well for about a decade or so!

Saturday, December 19, 2009

Weekly Links

No earth shattering news this week, but here's a few links and items worth keeping an eye on:

LNG demonstration video (LINK) Spoiler Alert: It's cold, it burns, and the dude has a Bic lighter.

LNG Presentations - Who's got it, who wants it and what they pay for it. (LINK)

An Alaska Gas Pipeline article from 1979 (LINK) The most delayed project in history?

Mackenzie Gas Project Report due 31 Dec 09 (LINK).

TransCanada Alaska Pipeline Project's Pre-Filing Monthly Activity Report November 2009. PF09-11-000. (FERC WEBSITE LINK) Yawn....

Denali November09 Status Report (FERC WEBSITE LINK) Notable quote "lack of progress on the State of Alaska’s fiscal regime for natural gas production"

A road to somewhere (with oil) (LINK)

Monday, December 14, 2009

XTO - Do the Math

Exxon (XOM) bought shale gas player XTO today for a $41 billion in stock (LINK). According the the news release:

"XTO’s resource base is the equivalent of 45 trillion cubic feet of gas and includes shale gas, tight gas, coal bed methane and shale oil."
That's about $0.91/MMBTU of XTO gas resources. Compare that to Alaska's gas estimated at 169 trillion cubic feet. Figure half of that is on Exxon leases. Figure $30 billion for a pipeline, $15 billion for Exxon's share - that works out to less $/MMBTU for gas resources in Alaska.

Apparently the cost of bringing XTO resources to market is more attractive to Exxon than Alaska But stay tuned.

Thursday, December 10, 2009

New Coordinator Appointed

President Obama has appointed Larry Persily to replace Drue Pearce as the Alaska Gas Pipeline federal coordinator. (LINK).

Let's hope it's the right help at the right time. Good Luck Larry!

Sunday, December 6, 2009

Fiscal Certainty - No Perfect Deal

As the much awaited year of open season approaches we're starting to hear more along the lines of "no perfect deal", "fiscal certainty" and "reality check". The latest installment come from former state economist Roger Marks: (LINK to KTUU):

ANCHORAGE, Alaska -- A former state economist had strong words Friday on the future of Alaska natural gas. Roger Marks says it's time for a reality check to secure a natural gas pipeline and Alaska's future energy needs.

Marks says other alternatives, such as shale gas possibilities in the Lower 48, might be a more realistic approach from an investor's perspective compared to the projected $30 billion cost of an Alaska natural gas pipeline.

He says in order to encourage a gas line, state lawmakers should be prepared to make some concessions -- like considering a constitutional amendment to lock in tax rates for pipeline investors ahead of time.

"I think there seems to be an attitude of a lot of people that we're entitled to the perfect deal, and we should accept no less than the perfect deal," Marks said. "And, I think, as often happens a lot in life, if you wait around thinking you're going to get the perfect deal, you wind up with no deal."
Link to Commonwealth North study on Alaska gas (June 2008)

Sunday, November 29, 2009

GIS Prototype

Back in September the Alaska Natural Gas Transportation Project Office of the Federal Coordinator published an article titled: OFC Plans Development Of An Integrated GIS Prototype For Viewing And Studying Proposed Gas Pipeline Route.

This morning I was poking around on the interweb and located the prototype - (LINK) Check it out. Looks interesting - I'd like a private version with grayling and burbot hotspots!

04 DEC 09 UPDATE - Last week this link worked. After a week of reviewing the site they slapped some security on the website - too bad, it was nice to be able to look at a tiny sliver of tangible work product coming out of the OFC. So much for transparency in government!

Alaska Gas Pipeline Presentations

Here's a handful of recent presentations located on the Resource Development Council for Alaska website:

The TransCanada–ExxonMobil Pipeline Project - Tony Palmer, Vice President Alaska Development, TransCanada

The Denali Pipeline Project Bud Fackrell, President, Denali: The Alaska Gas Pipeline

Federal Perspective on Alaska Gas Pipeline Projects Drue Pearce, (Soon to be former) Federal Coordinator, Office of the Federal Coordinator for Alaska Natural Gas Transportation Projects.

Thursday, November 26, 2009

Outbound LNG

What happens when natural gas storage is full and shale gas discoveries abound? ConocoPhillips exports LNG from storage! (LINK).

In May Freeport received regulatory approval to re-export foreign-sourced LNG from its terminal. This enabled Freeport and its customers to profit from seasonal price swings by importing LNG during summer, storing it and re-exporting to higher-paying markets in winter.

The 6.4 bcf of storage capacity at Freeport is nearly full, giving customers such as Conoco the option to re-export.

Previously, analysts had not expected to see much re-exporting activity from Freeport this year because thin LNG price differentials between global markets slimmed profitability. But, as Asian LNG prices rise toward January, margins could widen.
Add international LNG margins to the domestic gas equation - one more way to soak up high inventories. As inventories drop, domestic prices will find support above the $4.50/MMBTU level. For pipeline economics calculations this price level forms a lower boundary.

As a business model summer buying and winter exporting may prove profitable and add some small measure of price stability throughout the calendar year. Ultimately liquification capacity may be built to find foreign outlets for excess Gulf Coast gas.

Bottom line - all these factors are good development of the Alaska Gas Pipeline.

Sunday, November 22, 2009

Excessive Rates of Return

AGIA darling TransCanada has some explaining to do - The Federal Energy Regulatory Commission (FERC) is investigating (LINK-From Reuters):

FERC said the alleged higher rates of return were as follows:
* Great Lakes' 2,100-mile system transports natural gas through Minnesota, Wisconsin and Michigan. FERC staff calculated Great Lakes' total adjusted 2008 revenue to be US$290-million, which appears to yield an estimated earned return of 20.83%.

*Northern Natural Gas' 15,141-mile system extends from the Permian Basin in Texas to the upper Midwest. FERC staff calculated Northern's total adjusted 2008 revenue to be US$726-million, which appears to yield an estimated earned return on equity of 24.36%.

* Natural Gas Pipeline's 9,700-mile system consists primarily of two interconnected transmission pipelines, the Amarillo and Gulf Coast lines, which terminate in Chicago. FERC staff calculated Natural Gas' total adjusted 2008 revenue to be US$656-million, which appears to yield an estimated earned return of 24.5%.

FERC ordered that an administrative law judge convene within 30 days a prehearing conference to clarify the positions of the pipeline companies and the agency and consider any procedural issues and discovery dates necessary for the hearing.

Natural Gas Pipeline, FERC said, appears to be over-recovering fuel and lost and unaccounted for gas from its customers.

FERC said its staff calculated an over-recovery of 30.9 million dekatherms of gas.
Keep in mind that FERC (not the State of Alaska) will ultimately allow or disallow construction of the Alaska Gas Pipeline.

Take a look at those rates of return. Wow - lets' hope Alaska works a better deal - Oh wait the TransCanada money pipeline is already flowing out from Alaska.

Sunday, November 15, 2009

Denali Pipeline Updates

The Denali Pipeline has some new updates available:

Give a listen to Bud Fackrell's comments to the Alaska World Affairs Council.

Also take a look at the update on the Denali website.

Take aways - The open season schedule looks like it's firming up, and holy smoke! A 5,000 ton module looks ginormous!

Saturday, November 7, 2009

Shale Gas Numbers May Not Add Up?

The interweb is starting to heat up with discussions that shale gas may not re-write the books on North American Gas supply. Here's a few links on the topic:

Shale gas row gets nasty

Art Berman's Blog

Shale Gas: Promises, Promises, Promises

Shale Gas Companies: All Talk, No Walk?

Poll question - Can $8/MMBTU Shale Gas permanently strand Alaska's Gas?

Friday, November 6, 2009

AGIA Report

LINK to the State of Alaska Department of Revenue Department of Natural Resource Report Alaska Pipeline Project Report - Licensed under the Alaska Gasline Inducement Act (AGIA) dated 31 October 09.

Saturday, October 31, 2009

Liquid Fuels - Plan "B"

Tim Bradner of the Alaska Journal Commerce has this story (LINK) about Richard Peterson's, (President of Alaska Natural Gas-to-Liquids Co.) ideas on an Alaska Gas-to-Liquids (GTL) plant.

If lower 48 shale gas really has closed the door on arctic gas transportation projects (I'm not ready to believe that), then we need to get cracking on plan "B".

A GTL plan could include an in state gas line to feed it, and gas feeds to other existing industries (LNG and Ammonia), feeds to power generation and residential heating.

(LINK to March 2008 blog post on GTL)

The shale gas industry is young but it looks like shale gas can't be produced, on average, for less than $4/MMBTU (Henry Hub). I invite Mr. Peterson to present a comparative profitability analysis of a GTL plant in a range of $3/MMBTU to $10/MMBTU.

Bottom Line - Gas Line, LNG, or GTL - You choose, but if you snooze - you lose!

Sunday, October 18, 2009

TransCanada Presentations

Here's a handful of Links to TransCanada presentations on the Alaska Gas Pipeline and other topics. I especially liked the shale gas presentation.

Alaska Gas Pipeline

Supply Options for the U.S. Northeast

North American Shale Gas Overview

Saturday, October 17, 2009

Propane and Propane Accessories

Will propane wean Alaska off fuel oil? The Alaska Natural Gas Development Authority thinks so. Here's a link to a presentation on the scope of the project and the potential benefits (LINK).

Does it make sense? Sure - especially if displacement of high dollar naptha at GVEA can base load the project while additional users build infrastructure and convert to propane.

It's also makes even more sense at higher oil prices (and by the way the April 2010 crude futures are trading in the $80/bbl range).

It also makes sense to begin adapting local energy markets for natural gas liquids (NGL) that will be produced when the Alaska Gas Pipeline comes on line.

Saturday, October 10, 2009

Cook Inlet Syngas

Cook Inlet Region Inc (CIRI) has proposed an Underground coal gasification (UCG) project (LINK to project description).

In a nut shell the process carries air and steam to the coal where the coal is partially oxidized to form syngas. Here's the chemistry (C=Carbon, from the coal, H2O (water / steam), O2 (oxygen), and H2 (Hydrogen):

C + H2O → CO + H2
C + O2 → CO2
CO2 + C → 2CO

The CO (carbon monoxide) and H2 (hydrogen) are gaseous fuels well suited for combustion in a turbine for electric power production. There are some other materials (ammonia, hydrogen sulfide, methane and other hydrocarbons) co-produced with the syngas.

Best of all the energy content of the coal can be extracted without the environmental impact of traditional coal mining.

I look forward to hearing more details (capital cost, $/MW, etc). It's always good to hear about innovation and use of stranded energy resources.

Saturday, October 3, 2009

Alaska Gas Pipeline - Lasar Radar Mapping

If you would like to read something non-political about the Alaska Gas Pipeline today is your lucky day. Rob Stapleton of the Alaska Journal of Commerce posted this nice article about Lasar Radar Mapping.

The background information comes from the Alaska Natural Gas Transportation Projects Office of the Federal Coordinator (OFC) website. The OFC site includes a pdf file of a white paper titled LiDAR for Terrain Mapping on the Alaska Pipeline Corridor.

It's good to finally see some details on HOW we are going to build it instead of the perpetual discussion of IF we are going to build it.

Saturday, September 19, 2009

In-State Gas Line: Facts and Figures

Here's a link to a Petroleum News story by Kristen Nelson, It gives cost details for various routes and a unit cost of pipeline of $5.2 Million per mile (24" pipe).

The study did not consider the upstream gas processing plant or the cost of compressor stations.

Tuesday, September 15, 2009

A Natural Gas Riddle

What starts with an "A" and ends with an "A" and is moving forward with a $37 Billion gas project?

(Answer). It's not Alaska.

The big money and big projects are out there.

To quote Ricky Bobby "If you ain't first you're last"

On a positive note a "Well Done" goes out to the team that just completed the surface section of the second well at Point Thomson.

Maybe if the politicians and the bureaucrats got their act together the next mega-project announcement would be in Alaska.

Saturday, September 12, 2009

Unite - One Line, One Future

The outlook for the Alaska Gas Pipeline has looked pretty grim lately. The slow economy, low natural gas prices, maxed out storage, the shale gas bonanza and floods of LNG seem ready to extinguish plans for an Alaska Gas Pipeline.

An yet there are long term fundamentals that will continue to propel this project forward if and only if policy makers work hard and work smart. An example of working smart is Alaska Governor Sean Parnell's stance on fiscal certainty and the idea of working together for one pipeline.

Alaska Gov. Sean Parnell said Thursday he's not going to negotiate with the oil companies over how much the state taxes natural gas until they unite behind a gas pipeline project and can prove they need the help in order for construction to start.

Parnell told a Resource Development Council gathering in Anchorage that "once they've come together on a project, then come talk to me" about taxes. (LINK).
Resolving the tax issues is the final link needed to get this project moving. Everybody knows that two pipeline projects is a non-starter. The major producers are on board, AGIA and TransCanada are still in play, and even ExxonMobil might be happy.

The time is right, the Governor is right, it's time to unite.

Sunday, August 30, 2009

Alberta Clipper

Canada is hard at work providing heavy crude oil to the U.S. This article reports the U.S. approval of the Enbridge Alberta Clipper project (Link to project details). According to Enbridge the pipeline will carry 450,000 bbl/day in addition to another 1.6 bbl/day carried by other pipelines.

What does this mean to projects like the Alaska Gas Pipeline? - Nothing directly other than we should take note of the ongoing current and future demands for gas to fuel extraction of oil from the Canadian tar sands. Oil extraction requires about 1 BTU of energy for every 6 BTU of oil produced.

By my estimation production of 450,000 BOE/D tar sand oil requires about 435 MMSCFD of gas or about one tenth of the capacity of the Alaska Gas Pipeline. That gas has to come from somewhere and it might as well be from Alaska.

Projects like the Alberta Clipper and the Keystone Pipeline (500,000 bbl/d) point to the need to supply the Canadian Tar Sand projects with natural gas for the long term.

Maybe $2.75/MMBTU shale gas from East Texas can do the job, but then again maybe not.

Sunday, August 23, 2009

Economics of Natural Gas

Wow! NYMEX Gas dipped below $3/MMBTU last week. Here's brief article from the Economist discussing the current trends in natural gas (LINK to "The economics of natural gas - Drowning in it").

Here's the EIA chart on gas storage. This graph shows that current storage is above the history maximum (click to expand image).

Prices below $4/MMBTU and maxed out storage will tend to shut in some wells (deferred production) and slowdown exploration and development of new fields. Long term cheap gas will drive more electricity producers to gas vs. coal.

Of course the gas market is too complex to draw a conclusion about the future of the Alaska Gas Pipeline from a single data point in late August. New demand will come on line and old demand will come back as the recession eases.

Key an eye on crude as the price tops $70/bbl. Tar Sand crude still looks like the future and arctic gas will supply the energy to produce it.

Sunday, July 19, 2009

News Roundup

Links and Stories of Interest

Is the Future of Alaska's LNG Plant About To Flame Out?

Massive Shale Gas Field Found in BC

"The Horn River basin is located just south of Fort Liard and the NWT – BC border. An estimated 250 trillion cubic feet of shale gas is estimated for the basin, of which 20 per cent is reportedly recoverable."
The future for Alaska gas
"GTL’s have an unlimited market in U.S. today, tomorrow and 20 years from now"
Actual achievements point to Denali pipeline plan a success (By BUD FACKRELL)
"At Denali, we continue to take a long-term view of the project and believe there is a place for Alaska's gas in the North American market. The announcement by Exxon Mobil and TransCanada to work together on a competing project has not changed Denali's plans or goals. We have accomplished much over the last year and are focused on doing the work to make the Denali project a success. We have the team that can get the job done right."
Kitimat LNG Signs MOU with EOG Resources Canada for Natural Gas Supply
Kitimat LNG Inc. announced today that it has signed a memorandum of understanding (MOU) with EOG Resources Canada (EOG) to supply natural gas to Kitimat LNG’s proposed liquefied natural gas (LNG) export terminal in Kitimat, B.C.

Sunday, July 12, 2009

The Threat of Shale Gas

This weekend the Anchorage Daily News (ADN) ran a story titled "Alaska natural gas gets new competition". This is not exactly what I would call news, this blog looked at the impact of shale gas back in February.

It's not yet time to give up on Alaskan gas and here's why:

1) Alaska gas can be delivered to the Alberta oil sands cheaper than shale gas from Albany NY. Take a look at the map from the ADN article and imagine the pipeline infrastructure needed to move an equal amount of gas to the oil sands. In Alberta heavy synthetic crude oil will be produced from Alaskan gas at a rate of 6 BTU (as oil) for every 1 BTU of gas consumed. It's a rock solid business model and gas from Pennsylvania can't compete.

2) Gas markets are extremely complex and volatile. T. Boone Pickens can nay-say the pipeline all he wants, but follow the money. Where's the money in natural gas these days?

  • LNG (international stranded gas) isn't free (link to $50 Billion dollar LNG project story). The availability of LNG will figure into the cost analysis of any gas development project within 500 miles of any coastline.
  • Shale Gas may be plentiful but it isn't free either. When the gas price drops the drill bits stop turning and producing wells are shut in. The tipping point seems to be around $4/MMBTU. Shale gas leader Chesapeake calls this "deferred production" and last April they deferred about 13% of their gas production including gas from the Barnett Shale . This quote from the Chesapeake news release says it all:
    In addition, because of the steeply declining production profile of new natural gas wells and the upward trending slope of the NYMEX natural gas futures curve, Chesapeake believes deferring production and revenue to future periods with higher natural gas prices creates greater shareholder value than selling production into the current unusually low priced natural gas market.
  • Coal: Natural gas demand will increase and displace coal over time. Clean zero emission syngas from coal is technologically possible, but not at $4/MMBTU.
  • Nuclear: Fear, high cost and unresolved waste storage issues will continue to support the overall value of natural gas. Don't bet on the 1950's fantasy of nuclear power too cheap to meter.
  • Wind/Solar - There's a good reason Boone Pickens likes wind turbines. For every megawatt of wind or solar we build plan on building a megawatt of power from a gas turbine - you'll need it at night or when the wind stops blowing, and Boone will be happy to contract some firm gas for that need.
3) Finally - In the game of which gas projects will shut down other gas projects look for the Alaska Gas Pipeline to stall the Mackenzie pipeline. Both of these projects can supply gas to the oil sands, but Alaskan gas may just get to the finish line first.

Sunday, June 28, 2009

Fiscal Certainty - It's what Projects Crave is carrying this op-ed piece by Andrew Halcro (LINK). As always Andrew hits the nail on the head and takes the Alaskan lawmakers to task for inaction on tackling the biggest obstacle to building the Alaska gas pipeline - Fiscal Certainty.

In a nut shell: You can't invest $40 Billion in a long term project with variable or random taxes.

From the article:

Since 2006, Gov. Sarah Palin and others like DNR Commissioner Tom Irwin have been critical of former Gov. Frank Murkowski's proposed gas line deal which included offering the producers 35 years of fiscal certainty. Critics claimed extended fiscal certainty gave away state sovereignty and thus was the primary reason why AGIA was created.

So after years of promoting AGIA as the only way to get around having to offer Murkowski-esq terms to secure commitments from the producers to build the Alaska gas pipeline, has the gas-line paradigm been changed by AGIA?
The answer is NO! the paradigm has not changed. Since Andrew's article did not offer a pop culture reference to make the point I'll offer one:

Idiocracy - We live and work in a democracy where one man has one vote regardless of mathematically impairment or financial illiteracy. I think that's clear when you meet average folks with massive student loans, A.R.M. mortgages, zero percent balloon payment mortgages, and high interest HELOCs.

From what I've seen it might be easier to teach French to arctic squirrels than to explain cash flow and net present value concepts to lawmakers.

Saturday, June 27, 2009

"Nothing goes ahead until Exxon is happy with it."

More details came out this week outlining the agreement between TransCanada and ExxonMobil for work on the Alaska Gas Pipeline. (Link to Alaska House Resources Committee Meeting Documents).

High points from the TransCanada presentation:

  • TransCanada (TC) and ExxonMobil (EM) have reached agreement to work together to progress TransCanada’s Alaska Pipeline Project
  • Immediate EM participation and project support
  • TC / EM will jointly advance all aspects of the project–technical, commercial, regulatory, financial, etc.
  • EM contributing prior study results, existing Alaska ROW data
  • TC Alaska and Foothills remain the AGIA Licensees
  • AGIA rights / obligations are unchanged and remain with Licensees
  • EM is ready to work with the State to enable full participation in the AGIA license
  • Project Schedule unchanged- Initial Open Season target completion by July 2010
  • AGIA Project Scope unchanged: GTP and pipeline from Prudhoe Bay to Alaska delivery points, LNG via Valdez, or Lower 48 markets via Alberta Hub.
  • TC / EM will also advance an upstream gas transmission pipeline from Point Thomson to GTP to be included in the Open Season Outside of AGIA project and ineligible for AGIA reimbursement
  • Current TC / EM alignment not contingent on any commitments by State
  • TC can progress project independently, if it so elects, using all jointly developed assets /
Almost everyone gets what they want, the notable exception being CononcoPhillips and BP - (Link to the Denali Pipeline progress report).

TransCanada gets Exxon gas, Point Thomson gas, Exxon data, Exxon cost sharing and upto $500 million AGIA cash for project development. Exxon gets into the AGIA process, benefits from the AGIA cash and transforms the entire project to serve their needs.

TransCanada chief executive officer Hal Kvisle inadvertently coined the project motto when he said "Nothing goes ahead until Exxon is happy with it." Every future hurdle should be measure by the Exxon happiness metric.

Sunday, June 14, 2009

Alaska Gas Pipeline Report

A good summary report by William P. Doyle, Director of Permits, Scheduling & Compliance Office of the Federal Coordinator was submitted to FERC last week (LINK).

This report provides a good summary of the various possible Alaska Gas Pipeline Projects, although it states that

There is a very low probability that all five projects may be constructed. It is more likely that one interstate and one in state natural gas pipeline will be constructed.

Below, a figure from the the report showing all the possible projects: (Click on it for detail)

Friday, June 12, 2009

Exxon & TransCanada - It's official(?) - Update

Details are few, but the overall picture is shaping up - all three producers with gas, TransCanada, and $500 million of Alaska State AGIA money are all on board one of two gas pipeline projects. Even the Federal Government is on track to increase the total value of loan guarantees.

Next stop - Open Season 2010? Project consolidation?

TransCanada press release: (LINK)

According to the website of Office of the Federal Coordinator

Federal Coordinator Drue Pearce is delighted by today’s news that ExxonMobil has agreed to join TransCanada in its effort to construct a pipeline to commercialize Alaska North Slope gas.
I'll hold off on being delighted until I read a press release from ExxonMobil. Details - Let's hear some details (ExxonMobile News Release Link)

Thursday, June 11, 2009

Exxon & TransCanada

Developing: Exxon Mobil enters talks to help build Alaska gas pipeline. From the Houston Chronicle:

Exxon Mobil is in discussions with TransCanada to help it build a massive pipeline to move natural gas from the North Slope of Alaska to U.S. markets, according to a source familiar with the deal. The move could undermine a competing effort by ConocoPhillips and BP.

Irving-based Exxon would not be just a passive customer of the pipeline, which could cost as much as $30 billion and run 1,700 miles, but would likely be involved in the design and construction, according to the source. Exxon has deep expertise with large construction projects, including in harsh climates like Alaska.

Monday, May 25, 2009

National Energy Security Act

Here's a news item that's received little notice (yet). Senate Bill S. 774: National Energy Security Act of 2009 includes this section:

Section 116(c)(2) of the Alaska Natural Gas Pipeline Act (15 U.S.C. 720n(c)(2)) is amended by striking ‘$18,000,000,000’ and inserting ‘$30,000,000,000’. (LINK)
This would increase the federal loan guarantees for the Alaska Gas Pipeline (LINK). The bill is in the Senate Finance Committee. It's worth keeping an eye on. The bill is sponsored by Sen. Byron Dorgan [D-ND].

Saturday, May 16, 2009

More Denali Progress

Another sign of progress on by the Denali Pipeline team - This week the Federal Energy Regulatory Commission (FERC) Office of Energy Projects selected Argonne National Laboratory (Argonne) as the third-party contractor to assist the FERC staff in preparing the environmental impact statement for the Denali Pipeline Project. (LINK)

The Third Party program helps FERC by providing resources at the expense of the applicant.

Wednesday, May 13, 2009

Denali Project Update

Denali Project Update (LINK). Bullet points from the report:

• Completed a significant field program in Alaska.
• Established a Tok field office.
• Advanced engineering in the areas of route reconnaissance, thermal modeling, river crossings, and pipeline design.
• Awarded a multi-million dollar contract for preliminary engineering for the gas treatment plant (GTP) in February 2009 to Fluor WorleyParsons Arctic Solutions with CH2MHill as their exclusive Alaska subcontractor.
• Awarded a multi-million dollar contract for preliminary engineering for the mainline project in April of 2009 to Bechtel.
• Initiated stakeholder engagement in the U.S. and Canada.
• Pre-filed with the FERC in June 2008.
• Filed for a right-of-way across federal lands in Alaska.
• Actively began workforce development.
• Initiated conversations with regulatory agencies and governments at both local and federal levels in the U.S. and Canada.
• Conducted hydrology field studies in Canada.

Saturday, May 9, 2009

Drilling at Pt. Thomson

According to an anonymous comment to this blog drilling has started at Point Thomson.

This is great news not only because Point Thomson gas will one day flow in the Alaska Gas pipeline but because it's putting people to work now. Thanks for the heads up.

Saturday, May 2, 2009

TransCanada CEO "Upbeat" on Alaska Pipeline

TransCanada CEO gives the Alaska Gas Pipeline the edge over the Mackenzie Gas Project in the Northwest Territories (Full story by Lauren Krugel, THE CANADIAN PRESS)"

Five or six years ago, we were much more optimistic about Mackenzie than about Alaska," Hal Kvisle told reporters after his company's annual general meeting Friday.

"All the cards were stacked in Mackenzie's favour at that point in time."

The Alaska pipeline will traverse 2,760 kilometres of rugged terrain, require mind-boggling amounts of steel and is not expected to start carrying natural gas until around 2017.

Mackenzie, on the other hand, is less than half the length of Alaska - 1,220 kilometres - and would carry about a fifth of the daily volume Alaska would.

It was originally to have been in service this year.

"Things did not proceed over that period the way they should have, and here we are in 2009 and we're not yet through the greatest regulatory process that mankind has ever mounted," Kvisle said with a wry laugh.

"It's almost beyond belief the quagmire that we continue to work through."

One factor working against Mackenzie at this time is the fact that the natural gas fields have not yet been developed.

"The fields need to be completely drilled up. All the production facilities need to be constructed. Ominously, all the regulatory permits need to be received to do that kind of work," Kvisle said.

By contrast, the Alaska producers, BP, ExxonMobil and ConocoPhillips have been drilling in the Prudhoe Bay area of Alaska for several years.

"The field has reached a state of maturity where it's time to go ahead with the gas pipeline and the predictions by people like ExxonMobil have always been 2016-2018 would be the right time from a reservoir engineering point of view to bring that gas on production," Kvisle told shareholders.

Saturday, April 25, 2009

TransCanada pre-files with FERC

The Fairbanks News-Miner carried this:(LINK).

TransCanada vice president Tony Palmer said he has been talking with FERC and the pre-filed application comes about two years earlier than originally anticipated.

“Initiating the pre-file processes now will enhance the exchange of information between FERC staff and also assist with coordination of the agency activities for this important project,” Palmer said.

Drue Pearce, the federal coordinator for the Alaska pipeline, said pre-filing for a certificate of public convenience and necessity brings the public in from the start and puts environmental reviews into motion quickly. The pre-filing also results in a docket and regulators for the project

TransCanada's competitor, the Denali Pipeline received permission from FERC to pre-file almost nine months earlier (link).

Both competitors are still planning for an open season in 2010.

Thursday, April 23, 2009

Exxon Drilling for Gas at Point Thomson

The Alaska Gas Pipeline news has been sparse here lately. Here's one bright spot. ExoonMobil is busy up at Pt. Thomson.

From the press release (LINK):

Craig Haymes, Alaska production manager for ExxonMobil, said, "We are moving forward with drilling and development activities at Point Thomson, for the mutual benefit of Alaskans and the Point Thomson Unit working interest owners. DNR staff and other local, State and Federal agencies have worked tirelessly to process permits necessary to allow drilling to begin. We are on schedule to begin production at Point Thomson by year-end 2014 and look forward to working with the State to resolve the remaining Point Thomson issues to ensure the project schedule is not impacted. Construction crews recently completed the final installation of camps and support facilities at the existing gravel pad to accept the rig. Over 250 people will work on these drilling operations, with an average of over 500 people at year-end 2014, when we expect to begin production.”

Friday, April 3, 2009

Bechtel On Board with Denali

Engineering and Construction giant Bechtel has been awarded an engineering contract by The Alaska Gas Pipeline "Denali"

"I'm very pleased that Denali has been able to partner with Bechtel for this work,” said Kris Fuhr, Vice President and Mainline Project General Manager. “Bechtel has extensive experience designing and constructing major pipelines, including some of the world's longest. Their history and understanding of design and construction in Alaska and Canada will provide a solid foundation for the project. We are pleased to have them on the team.”

The mainline project includes the pipeline and associated compressor stations from Alaska's North Slope to Alberta, Canada.
This is probably the best news I've heard in a while. There are tons of hurdles to clear before we break ground on the gas line, but this announcement shows that the producers pipeline is bringing the best of best to the project. Bechtel is synonymous with Mega-Project engineering and construction.

Sunday, March 29, 2009

Who's working on the Pipeline

Last week TransCanada announced a contract award to URS for engineering work on preliminary feasibility and engineering study for the gas treatment plant that will feed the Alaska Gas Pipeline.

URS will subcontract the engineering work to Arctic Slope Energy Services.

The Denali Pipeline had previously awarded similar work to Fluor WorleyParsons Arctic Solutions. That joint venture has subcontracted with CH2M Hill.

The All Alaska Pipeline (The Alaska Gasline Port Authority) List Bechtel as a team member.

In terms of firms I guess that's just about everybody - did I leave anybody out? In terms of people I haven't heard of any large numbers of folks working on any part of the scope yet, which is to be expected since we are still in the preliminary stages.

Saturday, March 28, 2009

The Pitch for more Alaskan LNG

Could the All Alaska Gas Pipeline to Valdez be the option that works?

The Alaska Journal of Commerce posted an opinion article by Bert Cottle (LINK). Bert Cottle is the Chairman of the Alaska Gasline Port Authority.

Mr. Cottle's article lays out the top reasons we need to build the All Alaska gas line now.

It's true that the delivered cost of LNG is greater than pipeline gas, but the market for pipeline gas is restricted to the pipeline system. LNG can be marketed anywhere.

In addition to Mr. Cottle's reasons, let me add a few more:

1) The All Alaska option keeps control of project in American hands. I'd hate to see a gas line to the lower 48 get tangled up in the Canadian regulatory system and courts for decades like the Mackenzie Pipeline. You'll note there is no third flag in the photo at the top of this blog.

2) The All Alaska option is less expensive. Crooked bankers get billions from the Government for producing nothing but a mess. The oil industry funds our projects from revenues earned the hard way. I'd rather see a less expensive pipeline built now than wait a couple of decades for a larger project.

3) Building the All Alaska gas line to Valdez would support the future big line to the lower 48 (or tar sands). The project would complete environmental studies, build roads, treatment plants and train a workforce for work in this environment.

4) Finally - As that great philosopher Mickey Gilley said "All the girls get prettier at closing time" With Henry Hub natural gas prices below $4/MMBTU all Alaskans had better wake up and realize it's getting close to closing time for the gas pipeline. An LNG tanker steaming out of Valdez looks pretty good to me.

Saturday, March 21, 2009

Sarah Palin - Moment of Gas Line Clarity?

They say every addict has a moment of clarity as they scrape rock bottom. With oil and gas prices in the toilet has AGIA addict Sarah Palin finally hit rock bottom?

Speaking on the issue of gas pipeline fiscal certainty media darling and part time Alaska Governor Palin was quoted saying "We are open to whatever it takes to make sure it happens" (LINK)
Really? - Here's my suggestions for fiscal certainty:

1) Tax Holiday for the first 5 years. This will promote upstream work to fill the line from day one. It will also promote early payoff for pipeline investors.

2) Fixed Rates for the first 20 years. Unless your name is Obama, Bernanke, or Geithner it's hard to lay hands on $40 billion these days. Fixed tax rates allow investors to run the numbers and commit to a pipeline with fewer downside risk.

3) Long term Lower Tax Rates for gas sold in state. Promote the follow on projects. A greater number downstream uses (residential and commercial) will encourage expansion and support long term revenue stability for the State and the investors.

4) Open Your Eyes in terms of who builds the pipeline. AGIA made some sense in the formative stages. It sputtered in the market place. Then commodity prices plunged.

The little graphic above tells the tale. It's a graphic from the Governor's website - It's "Governor Palin's" AGIA - not "Alaska's" no it's her's. It's wrapped up in her massive ego. It's time to let go, wake up and move on - just do "Whatever it takes".

Wednesday, March 18, 2009

Palin and the Pipeline

Once again national coverage of the Alaska Gas Pipeline focuses on Sarah P. (LINK). Best quote from the story:

Former Governor Tony Knowles,-“It’s as if getting the gas pipeline built is only her second-highest priority. Her highest is making sure the oil companies don’t build it.

Thursday, March 12, 2009

AGIA - Worth a Second look

Given the overall economic gloom and doom Representatives Jay Ramras of Fairbanks and Craig Johnson of Anchorage have introduced a resolution to re-evaluate the AGIA pipeline project (LINK).

The competing Denali project is full steam ahead (LINK) for now anyway.

While current gas prices have led ConocoPhillips to cut back on its
Canadian operations, (CEO) Mulva discounted the low prices as a roadblock to the pipeline project's development. "You can't look at gas prices today," he said. You have to look at prices 10 years from now."

Wednesday, March 11, 2009

Reality Check

Alaska lawmakers got a gas pipeline reality check this week in Washington DC (LINK to the full story in the News Miner)

Rep. Jay Ramras, R-Fairbanks : “I’m concerned if it’s left up to the economics of the project, it is probably not going to happen. It’s quite doubtful.”

Rep. Mark Neuman, R-Anchorage, said an estimated trillions of cubic feet of shale formation gas has been located within the past few years.

Denali’s vice president for external affairs Scott Jepsen: “We have a long-term view. The gas pipeline has to be economical, and it has to be able to compete with other sources of natural gas. Long-term, we do believe there is space (for Alaska gas).”
A year ago the $500 million AGIA inducement sounded like a lot money - now it make take a whole lot more to get moving on the gas pipeline. Or maybe fiscal certainty?

Would knowing the future tax rates help free market forces finance a pipeline? That would beat the penniless beggar approach. The time has come to re-think the inducements and tune up the project economics on a free market basis.

Wednesday, March 4, 2009

In State Gas Lines Proposed - 2015

Capacity: 500 MCF/Day
Size: 24" Diameter
Cost: $4 Billion
Go/No-Go Date June 2011
Gas Flowing Date Early 2015

From the State Website: (LINK)

The first bill broadens the responsibilities of the Alaska Natural Gas Development Authority (ANGDA). Under current law, ANGDA is restricted to examining and promoting a pipeline project intended to deliver North Slope natural gas to tidewater for export as Liquefied Natural Gas (LNG). The requested revisions will allow ANGDA to examine and pursue all options to supply Alaskans with affordable, clean-burning natural gas.

The second bill proposes changes to the Right Of Way Leasing Act and the Pipeline Act. The bill addresses technical right-of-way issues for pipelines and clarifies oversight by the Regulatory Commission of Alaska.

Gas Markets Depressed

Article from Platts (LINK). Global economy has dragged gas prices down:

Sunday, March 1, 2009

In State Gas Lines Proposed

Building on the success of the AGIA gas line, Governor Palin proposes in-state gas lines (LINK).

Pre-warning for anyone who thinks they'll heat their home for Henry Hub gas prices (~$4/MMBTU). In most locations the cost of distribution is greater than the cost of the gas. I'll post a link as soon as the EIA website is working.

With no economy scale are these pipelines even remotely feasible?

Any reality checks from industry - leave a comment.

Tuesday, February 24, 2009

FERC Reports to Congress

(LINK) Quote:

Two proposals for an Alaska natural gas pipeline from Alaska’s North Slope into Canada have emerged and advanced to the detailed planning and project development stage. At this point in project development, both Denali and TC Alaska are now fully working towards obtaining quality information to conduct their respective open seasons (the formal process to obtain shippers for their pipeline).

In this commercial development stage of the process, both Denali and TC Alaska are expected to keep most of their information and decisions internal, yet they will also continue to work with, and inform, various levels of government, other stakeholders, and the public about their projects.

The Commission stands ready to do its part and reminds all stakeholders that construction and operation of an Alaska natural gas pipeline is the ultimate goal.

Pt. Thomson Update

Some leases are still in jeopardy as Exxon moves forward with work at Pt. Thomson. (LINK)

The state maintains that, on most of the leases, the companies have breached their contractual obligation to develop and that exploration and development rights are terminated.

"Exxon has two leases. That's it," Banks said. (acting director of the Alaska Division of Oil and Gas.)

Irwin has yet to make a final ruling on the administrative appeals to keep the other leases, and the earliest he would decide would be April, Banks said. In all, the companies filed eight administrative or legal challenges to the state decision to terminate the Point Thomson unit and cancel the leases.

Monday, February 23, 2009

Obama In Canada

Here's the transcript of the Obama/Harper press conference. (Link).

No mention of the Alaska Gas Pipeline that Obama once called "Promising" and that he claimed he would "Prioritize"

Sunday, February 22, 2009

Natural Gas Rig Count Drops

The number of rigs drilling for natural gas has dropped by about 25% since the 2008 high.

(LINK at Bloomberg). See the raw data at Baker-Hughes.

What does this mean to the Alaska Gas pipeline? - not much in the short term, but it will increase spot gas prices building the case for the pipeline. On the flipside drilling in the lower 48 is easier to ramp up if and when natural gas prices increase.

In the game of being first-ist with the most-ist a firm Alaska Gas Pipeline project could suppress lower 48 drilling programs. This would increase gas prices on the front end of the pipeline project and improve the economic performance.

The Bloomberg article points to lower rig counts out to 2012.

Wednesday, February 18, 2009

Denali Starts Work in Canada

From the Financial Post: (LINK)

CALGARY -- The U.S. pipeline group competing against TransCanada Corp. to build the Alaska natural-gas pipeline is cranking up operations in its rival's backyard, with plans to start field work here this winter, expanding its staff and recently opening its own office in Calgary.

"We're starting field work [in Canada] this winter," said Bob Bleaney, Denali Canada's general manager, integration. "It hasn't started yet, but the planning work is underway here in the offices. The groundwork will commence a little later on this winter."

Monday, February 16, 2009

Natural Gas Value

Here's a link to a Chesapeake Energy presentation on their natural gas projects in the lower 48. It makes good reading and puts the value of Alaskan natural gas in perspective.

Here's the short version: There are lots and lots of new large scale natural gas plays in the lower 48 :Haynesville, Marcellus, Fayetteville and Barnett shales.

The upside: Natural gas will experience increase demand as all things coal are demonized in the new world order.

Perspective / Opinion: There's still a role for Alaskan Natural gas. Current shale gas production is 600 bcf/yr (1.6 bcfd) (data source) vs. 5.0 bcf/d for the Alaska Gas Pipeline (data source).

Saturday, February 14, 2009

A Pipeline Prioritized

Back in November I wondered about Obama's level of support for the Alaska Gas Pipeline (link).

Also - the phrase "Prioritize the Construction of the Alaska Natural Gas Pipeline" could mean placing the Alaska Gas Pipeline at the bottom of the list. What's wrong with saying "Build the Alaska Natural Gas Pipeline"?
I haven't found any evidence that the "Priority" given the Alaska Gas Pipeline was a very high one. (LINK to Stimulus Bill Text)

I'm a huge fan of private enterprise. Government, including anti-industry Republicans, should keep their noses out of the way of people who create real jobs and real wealth. I'm not suggesting for a moment that the stimulus bill should have shoveled money at the gas line project. It's important to note that when Obama had a very long very expensive list of projects - the Alaska Gas Pipeline got stiffed. No loan guarantees, no funds for training the next generation of craft and engineers.

Note to self - This guy parses his words and he's no friend of the Alaska Gas Pipeline.

What's next? - Well I doubt Obama will do anything that would benefit Alaska and by association reflect well on Sarah Palin. The stimulus bill is rumored to have slashed military construction and spending on our veterans - Essentially shutting off the gusher of Federal money that Uncle Ted was so adeptly provided for years.

Note to Sarah: Good luck - Red State, three votes in Congress, possible rival in '12. Yep - you've been served.

Wednesday, February 11, 2009

Engineering Firms Hired

The Denali Pipeline awarded the first major contract to Fluor-WorleyParsons-CH2M Hill:

Read more at their website (LINK)

Scope: Design Phase of the Gas Treatment Plant:

The contract covers the services required during the initial design phase of the project for the GTP. Major contract elements include a series of technical studies, development of the project design basis, project execution planning, cost estimating, schedule development and other services.
Dollar value: Unknown.

Good work Denali - Putting engineers to work to get the pipeline built.

Thursday, January 29, 2009

About the Pipe

Steel prices have dropped due to the global financial worries. Delays and cancellations of large energy projects are starting to effect pipe mills (LINK) .

In particular, there is a growing demand from energy firms for X-100 and X-120 grade steel pipe that is 48 inches or larger in diameter. X-100 and X-120 are specialty steel alloys consisting of nickel, chromium, molybdenum, niobium, titanium, and copper.

Currently, X-100 and X-120 grade steel pipes are manufactured solely by Nippon Steel and Mitsui.

North American pipe-makers currently offer large diameter pipe with X-70 and X-90 steel grades.
Here's the math: Less steel is needed to build a high pressure gas line if you use high strength steel (X-100 & X-120) vs. lower strength steel (X-70 or X-90). Less steel equals less cost, reduces the customer cost paid for the natural gas.

The Japanese have long term needs for natural gas in the form of LNG, the technological ability to supply high strength pipe, and open capacity to produce the pipe. Why haven't they stepped forward for an equity position in an LNG project?

For Alaskans and the Alaska gas producers there are several advantages over the proposed Canadian pipelines:
  1. Reduced cost (shorter pipeline)
  2. 100% In State All-Alaska All-USA pipeline.
  3. Equity partner / Long term customer, reduces project cost and nails down future income model.
  4. Market Flexibilities - LNG can be sold to multiple markets (West Coast / Asia) vs. a single market via pipeline.

The Value of Alaskan LNG

Here's an article from Bloomberg with details of the Japanese purchase of Nikiski LNG. The price paid for the LNG caught my eye - $8.8 /MMBTU.

“The Alaskan contracts are hugely symbolic to the Japanese and I can’t see them giving them up or letting another buyer get access to those volumes,” said Tony Regan, an oil and gas consultant based in Singapore. “There are bigger renewals due this year from Australia and Indonesia.”
Here's my question - The Japanese pay a good price for Alaskan LNG, they are the largest LNG importer in the world, they sign long term contracts - Why haven't they expressed an interest in an equity position in an Alaskan LNG project using North Slope Gas?

Wednesday, January 28, 2009

Pt. Thomson - A Temporary Reprieve

Maybe there's enough time to get some work done this winter: (LINK)

Natural Resources Commissioner Tom Irwin announced he has "conditionally reinstated" two of the leases at Point Thomson, an oil-field unit that once encompassed more than 100,000 acres (40,000 sq km) and 45 individual leases.

"In my interim decision, I made clear to Appellants that I will hold them to their unconditional commitment, made under oath, to drill and produce from these wells and that failure to abide by their commitments will result in the automatic termination of these leases according to the lease terms," Irwin said in a statement.

This is good news in terms of putting folks to work now and setting the stage for a successful open season for the Alaskan Gas Pipeline in 2010.

(Link to DNR Announcement)

Saturday, January 24, 2009

Dim Outlook For Denali?

With crude oil trading in the $40's and natural gas below $5/MMBTU I was really not surprised to hear this news from Denali Pipeline partner BP (full story link)

"It's not a pretty story right now in terms of North American natural gas markets," Brian Frank, president of BP Energy Co and BP's North America Gas and Power, said at the annual conference held by the Alaska Support Industry Alliance.

Frank said he remains a believer in the Alaska natural gas project. But it can be successful only if there is a "stakeholder alignment," he said. "Without it, it's difficult to visualize the project going forward," he said.

Such alignment includes regulatory and fiscal "reliability" from the state of Alaska, Frank told reporters after his speech. "How do you know the economics for your project if you don't know what you're going to pay in taxes?" he said.
By comparison the Canadians took steps towards "stakeholder alignment" and fiscal certainty this week by announcing that the Canadian Government will offer financial support for the Mackenzie pipeline. Partnership vs. combativeness - now there's a novel approach, an approach that will probably lead to a pipeline decades before an Alaskan Gas Pipeline.

Tuesday, January 20, 2009

Canadian Government to Back Mackenzie Pipeline

Forward progress on an Arctic Gas Pipeline. (LINK) This is good news for the engineering firms, construction companies, the producers and all the working folks that actually build the big projects.

If the Mackenzie Pipeline breaks ground before the Alaska gas line it could represent a huge opportunity lost for Alaska.

The announcement is short on details but the timing is great - many projects have been canceled and the cost of commodities like steel is down.

A few more details on the Forbes site (LINK):

CALGARY, Alberta, Jan 19 (Reuters) - Canada has offered financial support for a C$16.2 billion ($13 billion) Arctic gas pipeline, the country's environment minister said on Monday, aiming to revive a struggling proposal to tap vast northern reserves with industry conditions worsening.

The offer to Imperial Oil Ltd and the other backers of the Mackenzie Gas Project would include chipping in money for infrastructure, such as roads and airstrips, as well as pre-construction expenses, Jim Prentice said.

Sunday, January 11, 2009

How is Your Project Going?

My new year started with the news that I can look forward to full year of overtime to meet an aggressive schedule. I may be on one of the only projects like that this year (recognizing full well that tomorrow we could all get laid off!).

Here's what I hear from others - One project has a hiring freeze, but construction is moving forward. Another buddy reports that his company has canceled all capital work for this year - Ouch.

Another project is in full scale layoff mode with folks packing their bags.

I don't want to discuss specifics, but how is your project going? - whether you work in the field or the home office I'd like to know how this slowdown is affecting you and where you see potential.

I get the feeling I'll be working on something other than the Alaska Gas Pipeline in 2010. That's a pity because the price of steel is down and labor is available. When this recession/depression ends our nation is going to need the energy.

Please comment, fill out the poll or both. Thanks!

Saturday, January 10, 2009

Rex Tillerson Discusses the Long Term Approach

Rex W. Tillerson Chairman and CEO, Exxon Mobil Corporation had some things to say about energy politics and the business cycle.

"The energy industry is a long-term enterprise, and decisions made today can have consequences for years to come. While elected officials understandably tend to think in terms of two, four or six years, based on election cycles, energy companies must necessarily think in terms of two, four and six decades, consistent with the lifecycle of our resource-development projects.

Even in the midst of our current economic downturn, which includes a return to more historic levels of crude oil prices, my company remains committed to investing in projects and technologies to meet tomorrow’s needs. Our business model is based on rigorous and realistic long-term planning. We try to look through near-term events. As part of this planning, we work to recognize risk factors that we know about today and can manage with the acknowledgment that there will be unforeseen risk factors that we will also have to manage in the future.

Our approach enables us to manage the risks inherent in the energy business and in the broader business cycle. As a result, for more than 125 years we have helped fuel the American economy – during good times and during bad times."

Does the reference to elected officials who think in two to four year time frames sound like anybody we know?

TransCanada Debt Grows

Get them while they're hot! TransCanada, the Alaska Gasline Inducement Act licensee is offering big interest rates on a multi-billion dollar bond issue:

Canada-based TransCanada Corp. on Friday said its subsidiary, TransCanada PipeLines Ltd., completed an offering of $750 million of 7.125 percent senior notes and $1.25 billion of 7.625 percent senior notes to partially fund capital projects and pay off debt. The first note is due Jan. 15, 2019 and the second note is due Jan. 15, 2039.

Standard and Poor's Ratings Services assigned its "A-" rating to these two senior notes and to the company's long-term corporate credit rating, saying the investment grade rating reflects the "mature-but-predictable earnings stream" from its natural gas pipeline operations and assets, the high level of free cash that its operations generate and the cash flow's increasingly diverse sources. However, S&P added, the company's leverage, expensive capital projects in the next two years and concerns over its nuclear operations expansion constrain the ratings.

(Link to Forbes)
I'm glad to hear that TransCanada is among the firms that continues to fund a pursue projects - that employs people and that's a good thing. Having said that it's still unclear how they will fund a $40 Billion gas line with their current financial resources.

Thursday, January 1, 2009

Sideways in ‘09

Alliance Breakfast Forum

First the good news: 2008 ends with TransCanada and the Denali Pipeline are working towards an open season in mid 2010. Steel prices are dropping.

The not-so-good news: The current low energy price trend combined with the credit crunch will conspire to limit or delay investment in the Alaska Gas Pipeline. Financially weak players like TransCanada don’t have the money to build a gas pipeline or the gas to fill it. (Link to TransCanada Colorado pipeline story)

Compounding factors: 1) The executive branch of the State of Alaska can’t get unstuck from stupid concerning Exxon. The “Drill Baby Drill” Governor has blocked Exxon from developing Point Thomson (Link to a speech by Larry Persily).

2) Lower 48 gas discoveries and development will continue to moderate gas prices. Energy producers will commit scarce funds in energy business friendly states before plunging into an Alaska Gas Pipeline project with no fiscal certainty.

The Wildcard: Barack Obama. Rescue programs, stimulus checks, bailouts, loans, debt swaps, you name it – 2009 will see a number of attempts to delay or deny the consequences of a decade of idiotic spending and lending. Obama is a wild card for the Alaska Gas Pipeline because it may seem like a good idea at some point to throw funding at the project in hopes of a favorable sound bite or two. Probability: Low, the happy bucket of bail out money will run dry long before the energy sector will get a dime, and that’s probably a good thing.

Prediction – Sideways in ‘09 No forward progress, no major setbacks.