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New gas line coordinator urges patience Persily sees competition but also help from rise of shale gas, says power generators and president offer hope for Alaska pipe project Wesley Loy For Petroleum News
Larry Persily, the new federal coordinator for Alaska natural gas transportation projects, is urging patience in the state’s already epic wait for a North Slope gas pipeline.
“I’m not here to tell you it will be built this decade. But I assure you it is not dead; shale gas has not driven a silver stake through the Alaska pipeline; the market has not forgotten us. It may not be paying as much attention as we would like, but that could change.”
Persily, a Juneau resident whom the U.S. Senate confirmed in March as the Obama administration’s choice as coordinator, delivered the remarks May 11 at an Anchorage luncheon co-sponsored by the Alaska Support Industry Alliance and the Resource Development Council for Alaska.
Persily said increased natural gas use in power plants, and even the surge of shale gas production, could help the cause of a multibillion-dollar gas line from Alaska’s North Slope.
While commercial and residential gas demand has been flat, and industrial demand has been dropping for 15 years, the gas share of U.S. electrical generation climbed from 12 percent to 23 percent between 1990 and 2009.
“It’s that trend in power generation that gives us hope,” Persily said, according to the printed text of his speech.
Natural gas will continue to face formidable competition from cheap, domestic coal, he noted. But converting power plants to gas is catching on, he said.
“The biggest boost to gas demand for power plants could come from the president’s energy policy that is built in great part on cleaner-burning natural gas – and domestic sources for that gas,” Persily said. “I have met with the president’s top energy adviser and senior White House staff, and I can tell you the president supports the Alaska pipeline….”
‘Shale gale’ Shale gas will be a dominant force for decades, Persily said.
“The ‘shale gale,’ as it is called, is producing close to 15 percent of domestic gas flow,” he said.
But shale gas has problems, Persily said, with states such as New York and Pennsylvania fearing the practice of hydraulic fracturing could pollute water. Shale gas also has much higher production costs than Alaska gas, he said.
Yet rising shale gas production could actually help prospects for a risky Alaska gas line by smoothing out some of the volatility in gas prices.
“It’s making gas buyers feel more comfortable that all that new supply will put an end to price volatility,” Persily said. “Alaska gas may be able to come along for the ride.”
He added: “North Slope producers, pipeline owners and the state may have to accept less profit from the gas than they would like.”
Open seasons Two partnerships, one pairing ExxonMobil and TransCanada and the other BP and ConocoPhillips, are conducting open seasons this year for proposed North Slope gas line projects through Canada.
Persily cautioned his audience not to be discouraged if very little news emerges after the solicitations for pipeline shippers close.
“One open season closes the end of July; the other is expected to close in early October,” he said. “Unlike oil and gas lease sale bids, the envelopes will not be opened to the public the minute after bidding closes. The pipeline developer and potential shippers will enter closed-door commercial negotiations. Those could last several months, without a word publicly of what’s going on. Maybe we’ll know something early next year; maybe not. Alaskans need to understand silence does not mean failure.”
Persily acknowledged that many Alaskans still fancy shipping liquefied natural gas to Asia, but he noted the North American market for gas is much larger than the Asian market.
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