BP works on cutting costs for gasline, ready to re-engage state, feds
Kay Cashman PNA Publisher
Dave MacDowell, director of external affairs-gas for BP Exploration (Alaska) Inc., told Petroleum News Alaska in mid-January that BP was continuing to work on ways to cut construction costs for the proposed gas pipeline from the North Slope to Lower 48 markets and was eager to re-engage in negotiations the state and federal governments.
“Our team has out sourced some steel bending tests that will be conducted … this year in the U.K. and Alberta, Canada,” he said.
The purpose of the tests is to see if lighter, high tensile steel can be used for the gasline.
“If you’re using higher tensile steel, it lowers the weight of the pipe. Lower weight means lower costs,” MacDowell said.
Same old four-legged stool “It’s still the same four-legged stool,” he said when PNA asked him what it would take to get a gas pipeline project approved by BP.
The four things BP has been saying it needs to move the project forward are state fiscal predictability, federal enabling legislation, an efficient regulatory process in Canada and a reduction in cost for the Alaska Highway gasline project, pegged at some $20 billion.
On the political side, MacDowell said BP is “clearly ready to re-engage on the federal side depending on how Congress wants to deal with energy matters on a national level.”
The company is also “eagerly awaiting an opportunity to engage with the state of Alaska toward a clear and certain fiscal framework. The one thing the state can do to help progress an Alaska gas pipeline is to work toward fiscal certainty, the most important thing. We have to have a clear understanding of the rules before this very large and very risky investment is made,” he said.
“It’s an ongoing government process in Canada as they work through the resolution of land issues,” MacDowell said.
Talks with pipeline companies have not resumed BP has not re-entered discussions with the pipeline companies interested in building, operating and at least partly owning the gasline.
“They are no negotiations with pipeline companies at this point,” MacDowell said, but he didn’t rule out the possibility of opening discussions in the future.
Timeline 2007-2010? When asked if BP had a different timeline in mind for possible start-up of a North Slope gas pipeline, MacDowell said, “I don’t think we have a specific timeline in mind; rather, we have articulated some of the key things that are needed before moving onto the next very expensive phase of engineering. We need to see progress in all of those areas before moving forward."
He said the timeline presented earlier in the year by Sir John Browne was still likely the goal.
Browne told analysts in early 2002 that North Slope gas could start flowing between 2007 and 2010. He also said last year that BP’s goal was to cut 10 percent, $2 billion, from the capital cost of the project through technology.
But Browne said 10 percent would not be enough to meet management’s fiduciary responsibility to BP stockholders. Other cost savings, he said, would have to come through public policy decisions by the governments involved.
Carruthers says 2010 John Carruthers, BP PLC program manager for Alaska gas development, told an Arctic gas symposium in March that economic and regulatory obstacles would likely prevent North Slope gas from flowing before 2010.
He emphasized the need for active support from all governments to assist the industry is bringing Alaska gas into production.
In particular, Carruthers said BP would like to see U.S. and Canadian regulators establish a timeline of 18 months for approvals and appealed to the Alaska government for greater certainty in taxes and royalties.
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