Uncle Ted Remembered

The early reports were confirmed this afternoon, Ted Stevens lost his life in a plane crash on his way to go fishing with friends. (LINK)

I felt pretty deflated when Senator Ted Stevens was drummed out of office a couple of years back. Today I feel plumb awful. His work on behalf of the people of Alaska and the entire United States has been greatly missed. His passing marks the end of an era.

The photo above shows Senator Stevens, Senator Inouye and Major General John Holly on a visit to military construction site I worked on a few years ago. Senator Inouye is wearing a lei fashioned from whirly gig fishing lures. General Holly is explaining what we built with the tax dollars the Senators allocated to our project. I don't normally rub shoulders with the higher ups but I was very impressed to listen to questions the senators asked and the answers they received. In a world full of second rate soft headed middle managers I was glad to learn that the guys in charge were first rate thinkers and top notch leaders.

On another occasion Uncle Ted brought Thanksgiving dinner to the post with assistance of the Alaska National Guard. Outside of Alaska I don't think the ordinary guy is ever on the receiving end of a nice visit and a hot meal from a senior elected official who rides into town in a C-130. Sure all politicians press the flesh, kiss babies and want votes, but I think Ted Stevens enjoyed seeing the people of Alaska and filling the role of the favorite uncle.


A chair was set up for Uncle Ted to play the part of Santa and entertain the kids after the meal. I stood in the chow line with Uncle Ted and ask him about my favorite subject - the Alaska Gas Pipeline. I asked him if Santa Claus would bring Alaska a gas pipeline. Ted Stevens laughed and told me I was like the guy who asked Santa for sports car and awoke to find matchbox toy car in his stocking. He told me that I might find a soda straw in my stocking instead of a full sized pipeline. That was years ago and I'm still asking Santa for a pipeline and waking up to find something much less.

We'll miss you Uncle Ted.

Concerned about Shale Gas?

Check out shale gas heavy weight Chesapeake Energy's August 2010 Investor Presentation.

They want to sloooooow down drilling until gas prices reach $6/MMBTU and they are looking for more liquids.

(See page 6 of the presentation)

That puts the shale gas threat in perspective. $6/MMBTU gas sounds like a market for AK gas really does exist.

BIDS!

According to multiple news outlets the TransCanada / ExxonMobil / AGIA Alaska Gas Pipeline Project has received bids.
(LINK1)
(LINK2)
(ALASKA DISPATCH)

More details later. Let's hope this develops into some good news.

What's Next?

I ask myself that question a lot. What's the next milestone, what's the next stretch of trail going to look like? Is this project ever going to get some traction?

According to Federal Coordinator Larry Persily, Office of the Federal Coordinator, Precedent agreements are next (LINK to PetroeumNews).

When a shipper and a project sponsor reach agreement they sign a precedent agreement which is then filed with FERC: Precedent agreements become public after 10 days.

The Alaska Pipeline Project’s schedule says it is seeking to have precedent agreements signed by the end of the year; Denali’s schedule says Feb. 1, 2011.

Persily said what that means is that by the “end of this year, early next year, we’ll know if we’re closer to a deal on a gas line; we’ll know if there are any signed precedent agreements out of the open season.”

The article goes on to record his wishful babblings about a magical day when coal fired power plants are demolished and replaced by natural gas power plants - What's the time line on completion of a couple of hundred $500 Million to $1 Billion power plant projects - This is your message of hope for the Alaskan Gas Pipeline Larry?

And then there's this scripted quote directly from the White House talking points of the day memo:

But Alaskans need to realize that chances for an Alaska gas pipeline would be helped by passage of “comprehensive energy legislation that helps move the nation to natural gas as a preferred fuel for electrical generation,”

No mention of building a meaningful tax structure for the pipeline builders and shippers. He goes on to fantasize about a world were shale gas trims off the high end of gas market prices. From his perspective shale gas helps the Alaska Gas Pipeline because stable gas prices cause utilities to build more gas fired power plants.

Here's an alternative universe:

(1) Yes - Gas power plants are good, and a few are getting built - but there's also some rather large coal plants in construction as well. I'd say the two fuel sources will continue to compete for at least one more decade.

(2) Shale gas aint free, and it's not universally loved. For every coal hating global warming advocate I'll and find you a shale gas hating environmentalist. We also know from following Chesapeake(CHK) that shale gas producers will shut in shale gas wells when prices drift below $4.50/MMBTU.

(3) Shale gas isn't doing TransCanada any favors. According to the Calary Herald (LINK) shale gas is beginning to impact TransCanada's mainline volumes in a big way.
The answer to TransCanada's problem is to fill their mainline with Alaskan or Mackenzie Delta gas. Price that gas to compete with Northeastern shale gas and establish a new gas price equilibrium in the $5.50 to $6.00 range. Shale gas producers like Chesapeake carry a lot of debt and don't have the wiggle room to compete with large volumes of arctic gas. XTO, another shale gas leader is now owned by XOM, a North Slope producer - they are in the best position to weather the coming competitive storm and even profit from it.

(4) Arctic gas is also needed for the ongoing energy needs of the tar sand / oil sand industry. The bitumen plants in Alberta will become long term, steady baseline customers for arctic gas. That demand is more attractive than gas turbines designed to pick up load when the wind fails to blow in the wind power regions.

No Larry - I don't buy your logic, I still believe in the competitive forces of the market place and I'm cheering for TransCanada to re-fill their mainline with arctic gas, hopefully Alaskan Arctic gas.

BP-Apache Deal: Prudhoe Bay Was Too Complex

From the Wall Street Journal Blog: (LINK).

The BP- Apache deal is a no-go. Alaska Gas Pipeline effect: Assuming the TransCanada / ExxonMobil project and the Denali project merge BP will still be a player. A cash strapped, weakend player but in the game all the same.

The upside: BP's current unfortunate situation may help all the producers over the conceptual hump to merge the projects sooner rather than later.

Irony

From the Irony Department: Folks in Nebraska oppose the Keystone XL pipeline. This pipeline will carry Canadian bitumen products to U.S. refineries where the evil oil companies with refine the bitumen into gasoline, diesel, jet fuel - you know the stuff that powers our modern society.

I support everyone's right to free speech, but anti oil company, anti pipeline BUMPER STICKERS just points out how perfect our Idiocracy has become.


Maybe the oil company haters in Nebraska will succeed and kill another energy project. Nebraska say hello to Mule power!

Denali Open Season Starts Tuesday 6 July 2010

See the detailed FERC filing (LINK)

The link contains one letter and three volumes of open season information. The In-State Demand Study is in Volume II- Good reading if your #1 issue is In-State industrial development and the $8 Billion Bullet Line.

Volume III has technical stuff, and the cost estimate ($35.5 Billion)

Some quick ratios to think about: $35.5 Billion moves 4.5 BCFD ($7.9 per cfd capacity) vs. $8 Billion for up to 0.5 BCFD for a bullet line ($16 per cfd capacity). The economies of scale work for the big line and against the Bullet Line.

Good Luck Denali ! Let's start building this damn thing!

Note: the competing TransCanada / ExxonMobil Alaska Pipeline Project open season is in progress and end 30 July 2010. Good luck to you guys too - I looking forward to the Kumbaya moment when all the producers join together.