The big story for 2011 will be the results of the 2010 open seasons. Each pipeline project (APP* and Denali) will complete and execute precedent agreements where shippers make long term commitments to ship gas. Prediction: With a little luck we’ll hear some positive news on these agreements before the Nenana ice goes out (late April-ish).
To date we know that TransCanada (APP) did not meet its target for binding agreements by the end of 2010 (Fairbanks News-Miner 07 Dec 10). Imagine the difficulty of signing a binding contract loaded with conditional statements about tax rates, project mergers, the price of steel and long-term gas supply agreements. The project cost is also at risk due to uncertainty of interest rates. One day the Federal Reserve might just run out of ink and stop printing free money. That will jolt the bottom line of the project, although a small interest rate jolt might push the project in the right direction and cause a sense of urgency.
Maybe the APP delay is not a bad signal. The TransCanada AGIA proposal included a very notional estimate of the LNG option. It might take longer to execute the agreements if a viable shipper seeks to ship gas on a Y-Line LNG plant option smaller than the options outlined in the TransCanada AGIA base cases. For all we know a viable shipper may have bid to take gas off at Glennallen for in-state use. Prediction: Expect a viable shipper for a 7 MMTPA Valdez LNG plant, that's roughly equal to 1 BCFD, or half the notional capacity described in the TransCanada AGIA proposal.
The next big milestone, not shown on any official schedule, is the merger of the projects. The producers (ExxonMobil, ConocoPhillips, and BP), TransCanada and some surprise as yet unnamed shippers all know that they must converge at some point. Prediction: Project merger announcement in late 2011.
Of course my glass is half full, maybe two out of three of these predictions will come true. Best wishes for a happy and prosperous 2011.
*Nomenclature Note: Henceforth I’ll use the name “APP” to describe the Alaska Pipeline Project instead of TransCanada-ExxonMobil+AGIA.