OCS Development

A report titled "Potential National-Level Benefits of Alaska OCS Development Prepared for Shell Exploration and Production February 2011" is now available on the Northern Economics website.

Some quick calculations show that the report estimates 0.7 BCFD of gas and 528,000 BPD oil (averages based on the stated production durations). That's roughly 15% of the capacity of a 4.5 BCFD gasline and 25% of the capacity of TAPS (maxed out).

The 2009 report titled "Economic Analysis of Future Offshore Oil and Gas Development: Beaufort Sea, Chukchi Sea, and North Aleutian Basin Prepared for Shell Exploration and Production March 2009" provided these oil and gas production curves:

One more statistic: This is blog post #300 and still no firm project plan for an Alaskan Gas Pipeline.

Reality Check

The reality of a bad investment climate is starting to sink in. The ideas behind the Make Alaska Competitive Coalition should be expanded to Alaska natural gas.

The latest

The latest news coming out on the Alaska Gas Pipeline is not good. Former Governor Frank Murkowski says AGIA is dead. The worst news I've heard is the Denali Pipeline is reducing staff down to a skeleton crew.

The pundits and politicians carry on about bullet lines, in-state lines for an LNG terminal, and even building a petrochemical industry in Fairbanks. The value of these proposals range from "Almost feasible" to "Complete rubbish". The report on the in-state gas line shows that the idea lacks economies of scale. The idea of an LNG terminal at Valdez falls into the "almost feasible" category, but continues to fail to gain traction in the marketplace.

The bright side: Development and expansion of production of tar sands continues. Communities in the lower 48 complain and protest new tar sand pipelines, but the economics are good for squeezing oil out of sand in Canada. The process requires lots of energy - energy that could come from inexpensive Alaskan natural gas.

The other bright note: Lower 48 natural gas is so cheap that LNG import terminals are being modified to export LNG (example: Cheniere Energy Sabine Pass). Moves like this signal a bottom in gas prices - I hope more Gulf Coast LNG plants can sponge up shale gas for export.

Bottom Line: I'm still in the "wait and see mode" but the project is drifting into oblivion. I'm beginning to think that external events will determine the fate of the project.

In-State Gas Report

Link to Roger Marks Report on Alaska natural gas pipeline projects (LINK)

Cook Inlet LNG Closing

When the numbers stop making sense oil and gas firms pull out. First Agrium closed the fertilizer plant, now ConocoPhillips and Marathon are closing the LNG plant. The press reports sound like the plant will be mothballed and maintained for possible storage use.

ConocoPhillips spokeswoman Natalie Lowman said the intent is mothball the plant "and preserve it for future options that might include exports for natural gas being delivered from the North Slope, imports of LNG, and just generally any reconfiguration of the plant for other natural gas supply options."

Is reconfiguration a code word for "import terminal"

BG outlook for LNG

Check out this presentation by BG: (LINK)

Items of note: Use of LNG will be constrained by supply. There's also a good table showing the cost of shale gas on page 52. The shale gas cost page supports my view that the longer term gas price will approach $6/MMBTU vs. free.

Long story short - there's still a market for Alaskan natural gas.