DJ US May Pay $300B More For Gas Without Arctic Supply - Study
Fri, Sep 7 2007, 22:03 GMT
fxstreet.com
Consumers in the continental U.S. will pay about $300 billion more for natural gas from 2014 to 2025 unless pipelines from Alaska and northern Canada are brought into service, according to a study commissioned by the Department of Industry, Tourism and Investment in Canada's Northwest Territories.
At Louisiana's Henry Hub, the benchmark for natural gas contracts traded on the New York Mercantile Exchange, futures would trade $0.75 a million British thermal units higher if Arctic gas weren't available from 2014 to 2025, compared to projected prices if Canadian and Alaskan supplies did reach the U.S. market, according to the report. The study was conducted by Calgary-based Angevine Economic Consulting Ltd.
Customers in the Midwest would be hardest-hit, paying $60.7 billion more for gas in the absence of Arctic supplies, the report said. Northeast customers would pay $50 billion more.
The availability of natural gas supplies is an increasingly important issue for the U.S., said Brendan Bell, the minister of industry, tourism and investment for the Northwest Territories, speaking to analysts in New York Friday. Oil reserves in politically unstable countries like Iran and Venezuela are unreliable, and concerns about carbon emissions will limit energy production from coal, Bell said. Other energy resources, such as wind power, can't be produced cheaply in large enough quantities to satisfy demand, he said.
"Security of supply is becoming more and more of a critical issue going forward, not less," Bell said.
A lack of Arctic gas would also result in greater carbon emissions in the continental U.S. from 2014 and 2025, according to the study. Emissions in the lower 48 states would rise by 258 million tons in the absence of gas supplies from Alaska and Canada, the report said.
The largest emissions increases - 171 million U.S. tons, or 2.7% total - would come from Texas, the Southeast and South Central states, the study said. Much smaller increases would be seen in the Northeast and California, where supplies of coal are less abundant.
The study assumes that an Alaskan natural gas pipeline running from the Alaskan North Slope to connect with the North American gas transmission system in Alberta, Canada, will product 4 billion cubic feet per day of gas during the fourth quarter of 2017, expanding to 6 bcf in 2020. The study also assumes that a gas pipeline from Canada's Mackenzie Valley in the Northwest Territories will enter service in 2013 with an initial throughput of 1.5 bcf per day.
A consortium led by Imperial Oil Resources Ventures Ltd. is leading the Mackenzie Valley pipeline project, which is estimated to cost about $16 billion. The project is awaiting regulatory approval and is expected to go into service in 2013 or 2014. The Mackenzie Valley has about 55 trillion cubic feet of proven gas reserves.
Meanwhile, the Alaskan government is soliciting bids for companies to develop a pipeline that could bring 35 tcf of gas reserves to the U.S. from Alaska's North Slope. Project estimates range from $10 billion to $30 billion.
U.S. natural gas consumption is expected to reach 26.3 tcf by 2025, up from 22.4 tcf in 2004, according to the U.S. Energy Information Administration.
-By Christine Buurma, Dow Jones Newswires; 201-938-2061;christine.buurma@dowjones.com |
