The U.S. Department of Energy’s Energy Information Administration (EIA) has release the Annual Energy Outlook 2011 (LINK). The Globe and Mail (LINK) calls the report an "Energy Fantasy Land" The Alaska Gas Pipeline is no longer a feature in the AEO base case:
The Alaska natural gas pipeline, expected to be completed in 2023 in the AEO2010 Reference case, is not constructed in the AEO2011 Reference case. This change is a result of increased capital cost assumptions and lower natural gas wellhead prices, which make it uneconomical to proceed with the project over the projection period.What's behind the demise of the Alaska Gas Line? Shale Gas of course, abundant, cheap shale gas:
The annual average natural gas wellhead price remains under $5 per thousand cubic feet through 2022, but it increases thereafter because significantly more shale wells must be drilled to meet growth in natural gas demand and offset declines in natural gas production from other sources. As the shale gas resource base is developed, production gradually shifts to resources that are somewhat less productive and more expensive to produce. Natural gas wellhead prices (in 2009 dollars) reach $6.53 per thousand cubic feet in 2035, compared with $8.19 in AEO2010EAI projections show Alaska gas dwindling to oblivion by 2035:I think Jeff Rubin of the Globe and Mail has it right - this is a Fantasy Land forecast, but it's a happy fantasy with cheap oil and cheap gas for decades. I'll offer this forecast: 2011 will see the return to $100/bbl oil and natural gas prices will climb out of the ditch and skyrocket to $5.00/MMBTU.