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.