State gives 2011 as probable start of gas line construction
By R.A. DILLON, Staff Writer
Article Published: Tuesday, April 04, 2006
news-miner.com
JUNEAU—Natural Resources Commissioner Mike Menge said permitting for a natural gas pipeline from the North Slope to the Lower 48 would likely begin in 2008 with construction to start by 2011.
Menge made the comment Monday during a meeting in Juneau with Northwest Territories Minister Brendan Bell, who was in town to talk with Gov. Frank Murkowski about the role of Arctic gas in supplying North American energy markets.
Canada is pursuing its own gas pipeline project in the Mackenzie Valley, which has 7 trillion cubic feet of known reserves. The 700-mile Mackenzie line in the Northwest Territories is in the permitting and public hearing phrase and is expected to start delivering gas by 2011.
Murkowski announced in February that the state had reached a deal with Exxon Mobil, BP and ConocoPhillips to build the 3,500-mile line from the North Slope through Canada to the Lower 48. Two of the three producers—ConocoPhillips and Exxon Mobil—are involved in the Mackenzie project.
The Alaska line is slated to start construction after the Mackenzie line is completed to avoid competition for labor and steel, the price of which has increased 150 percent since 2000.
The $7.5 billion Mackenzie line is expected to expend 20 percent of the cost on the purchase of steel.
“These two projects are logically sequenced and queued up so that Mackenzie goes first with Alaska behind,” he said.
Bell said the timing of the projects will ultimately be decided by the major oil companies.
The Alaska and Canadian lines are not in competition with one another, Bell said. However, the projects are in a race against the rising labor and steel costs and the arrival of a rising amount of foreign liquid natural gas or LNG.
“The clock is collectively ticking,” Bell said.
Menge said the projects “are mutually compatible because it does create a niche for all Arctic gas. We have to establish our market position as soon as we can.”
The two lines are expected to have only a short-term effect on consumer prices when they come online, however. The Mackenzie Valley will deliver as much as 1.8 billion cubic feet of gas a day, while the Alaska line will produce 4.5 billion cubic feet of gas a day.
The gas would be evenly distributed across North America, resulting in a drop in price of just 25 to 50 cents per thousand cubic feet, Menge said. Consumer prices would likely return to normal in six months to a year, he added.
The relatively small effect on price has Canada supporting construction of the Alaska project.
“In the past we had a concern that if all the Alaskan gas came to market, it might depress the prices somewhat and skew the economics for Mackenzie,” Bell said. “I think largely we’ve now realized that given the bullish price of gas that even if Alaska were to come on first, it wouldn’t give us the same concern.”
Both projects have a ways to go before the first gas flows.
The Canadian government is still negotiating the fiscal details of a deal with the producers, who aren’t expected to make a final decision on whether to start construction until 2008.
In Alaska, Murkowski has said the state will buy a 20 percent equity ownership in the pipeline to make the deal financially feasible for the producers. The producers have asked for no such deal on the Canadian line, though they have requested fiscal certainty on future gas taxes, Bell said.
The state Legislature still has to review and approve the deal the governor has negotiated with the producers. Murkowski has refused to release details of that deal until lawmakers approve reform of the state’s oil tax system.
The North Slope project still has to go through the permitting process in Alaska and Canada.
Staff writer R.A. Dillon can be reached at (907) 463-4893 or rdillon@newsminer.com. |
