Denali Timeline

The latest FERC filing by Denali includes this time line for the current and near term open season activities: This fragnet ends with filing confidential precedent agreements with FERC on 23 March 2011.

There's a few wiggle words about "highly conditioned bids" and resolving "conditions within its control" but overall progress continues.

Glimmer of Hope

The Black and Veatch report titled "Growing Shale Resources: Understanding Implications for North American Natural Gas Prices" is now available for your review. It should help lawmakers craft some workable fiscal framework for the Alaska gas pipeline.

From the Petroleum News:

And the Black & Veatch analysts have found that, although there are major uncertainties around future North American gas markets, it is likely that gas prices in Alberta, Canada, will climb to somewhere between $5 and $7 per thousand cubic feet by 2020, with prices continuing to climb thereafter. And with a possible fee of $3.50 per thousand cubic feet for treating North Slope gas and carrying it by pipeline to Alberta, those gas prices could make a North Slope gas line viable, Antony Scott, a commercial analyst with Alaska’s Division of Oil and Gas, told Petroleum News Nov. 22.

The report projects Henry Hub gas prices of $6.00/MMBTU to $8.00/MMBTU and Canadian AECO prices in the range of $5.00/MMBTU to $6.20/MMBTU.

I keep and eye trained on the shale gas producers behavior. It's known that they shut in some wells at $4.00/MMBTU and that they are divesting at a rapid pace. There's more than few stories of outrageous lease cost paid and 25% royalty agreements. Given what I've seen I would not invest in a shale gas play for a penny less than $6.00/MMBTU on the revenue side.

Shale gas can't kill the Alaska gas pipeline but the politicians and the taxman can. I'm hoping the recent changes in Parnell's administration will pan out.

In Other Energy News....

Sustina Hydro endorsed by Governor Parnell

From the State of Alaska Website:

Governor Parnell Backs Susitna Dam Project

November 24, 2010, Juneau, Alaska – Governor Sean Parnell today announced his support for the Low Watana site on the Susitna River as the primary hydroelectric opportunity for Alaska’s Railbelt. The governor’s support follows the Alaska Energy Authority (AEA) recommendation for the large hydroelectric project.

“In order to provide low-cost electricity for the Interior and the Railbelt and to meet the state’s goal of having half of Alaska’s electricity generated by renewable resources by 2025, we must invest in a large-scale hydro project,” Governor Parnell said.

Earlier this year, the Alaska Legislature appropriated funds to study the feasibility of major Alaska hydroelectric projects including Susitna, Chakachamna and Glacier Fork.

The AEA report concluded that the Susitna Project would produce two to three times more energy and at a lower per unit cost than the others; that Susitna is less likely to result in adverse environmental effects; that the project has fewer licensing and permitting complexities; that it can start sooner and involves simpler construction; and that it has a lower long-term operational risk factor.

Governor Parnell also announced he will propose legislation that will allow AEA to pursue funding for and ownership of the project.

AEA will hold a series of public workshops on the hydro project in February. A copy of AEA’s large hydro study is available at: www.akenergyauthority.org.

Link to Railbelt Large Hydro Evaluation Preliminary Decision Document

Trend Spotting

It's always dangerous to imagine you've detected a trend in natural gas, but here are four data points that might line up to help the prospects for the Alaska Gas Pipeline:

1) Shale gas producers are shutting in wells and backing away from dry shale gas prospects (LINK1) (LINK2)

2) There's a current trend to export refined products from the US (Downstream Today "US Could Become Net Fuel Exporter")

3) There's a project underway to convert the Cheniere LNG import terminal into an export terminal. (Cheniere Working On Deal To Send Liquefied Natural Gas To China).

4) LNG prices are firming up in Asia, (LNG's Asia Premium to U.S. Gas Advances to 20-Month High: Energy Markets)

Global gas prices are diverging as U.S. customers switch to cheaper, domestically produced gas from shale deposits, while Asian importers continue to pay prices linked to oil. Shale gas will account for 34 percent of U.S. production by 2035, compared with 18 percent in 2008, Energy Department estimates show.

Maybe it's a trend, maybe it will bear out over time. On a BTU basis LNG is less expensive than oil. The resurgence of Asian demand and devaluation of the dollar may drive the economics for an LNG export terminal in Valdez - It's time to lock in some long term contracts. Something to look forward to when the open season agreements are made public. As always my glass is half full and my fingers are crossed.

Speaking of trends it looks like Lisa, or Leza Murkowski or Mercawski will retain her Senate seat. This is good news for the Alaska Gas Pipeline, Alaska may have dodged a bullet. (Comic)

State Gas Team in Flux

From the News Miner :

Parnell has released Revenue Commissioner Pat Galvin, Health
and Social Services Commissioner Bill Hogan, Natural Resources
Commissioner Tom Irwin, Transportation Commissioner Leo von Scheben,
Administration Commissioner Annette Kreitzer and Education Commissioner Larry
LeDoux, spokeswoman Sharon Leighow said this morning.

Galvin has expressed a desire to remain with the administration,

Galvin and Irwin had front-row — and often hot — seats for ongoing debates over oil and gas development policies in Juneau. The debates produced, among other things, the 2007 Alaska’s Clear and Equitable Share oil tax increase and the Alaska Gasline Inducement Act. Parnell has also said OK to the resignation of a top Irwin deputy, Marty Rutherford.

Shale Gas For Sale

Shale gas will kill the Alaska Gas Pipeline - If I had a nickel for every time I heard that...
The new mantra of the shale gas business is "NGL" or natural gas liquids, i.e. propane and light paraffins. I've posted a lot of news releases from Chesapeake outlining their plans to edge away from dry shale gas plays and move into liquid rich plays. Apparently all shale gas plays are not created equal.

That trend is firming up with news that Range Resources is selling it positions in the Barnett Shale (LINK).

Range Resources said Wednesday that it will sell all its holdings in the Barnett Shale and use the cash to invest in more profitable ventures elsewhere.

From the Range website: "The general consensus was that pricing is currently too low to be sustainable."

Long term outlook - Shale gas will continue to play a part in the fossil fuel mix, but it's not the only game in town. Even the Shale Gas guys think it's too cheap.