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Over-the-top back again Northwest Territories cabinet minister ready to talk combined Alaska, Mackenzie gas lines Gary Park For Petroleum News
More often than not, it’s been the unwanted guest at the party, but it has kept reappearing at intervals over the past 30 years.
It’s the so-called “over-the-top” route, an option barred under Alaska state legislation and generally turned away at the door in Canada.
But as construction costs rise to the stratosphere and the demand for Arctic gas from both the United States and Canada moves towards a critical level it has gained a fresh airing, five years after last making a public appearance.
It’s been brought back to life by Northwest Territories Minister Brendan Bell, who treads carefully through a diplomatic minefield by avoiding any suggestion of forcing the issue on Alaska, but also argues that if ever Arctic gas is to be monetized there is an urgent need for “leadership and vision.”
He laid out some arguments for going “over-the-top” at Houston’s Offshore Technology Conference earlier in May almost as an aside in making a case for developing the offshore and onshore potential of the Mackenzie Delta and Beaufort Sea.
Bell said his region shares geological similarities with the Gulf of Mexico and would attract a flurry of exploration if the absence of takeaway capacity could be solved.
Cost greatest concern for Arctic gas Although North American gas demand is robust, government and industry support to open up the region is making headway and the attempts by aboriginal leaders to use a pipeline as leverage are fading, the greatest concern of all is cost.
The latest budget estimate for the Mackenzie Gas Project is C$16.2 billion, while some have put a price tag on an overland Alaska pipeline at US$40 billion.
Bell said those numbers raise the question about what logical role governments can play in stimulating development of their gas resources, such as a depreciation schedule, loan guarantees or help in building infrastructure.
“Governments need to step up to the plate,” especially as matters of energy security become paramount in North America, he told Petroleum News.
To that end, he strongly disagreed with TransCanada Chief Executive Officer Hal Kvisle, who recently said that whether the MGP was completed in 2010 or 2020 was “not critical” if liquefied natural gas imports from Russia in particular could meet some of North America’s needs.
Bell said the time may have arrived to reframe the debate over the future of Arctic gas, by taking a closer look at options that could be cheaper than two overland pipelines.
Bell: both U.S. and Canada should benefit He said the objective should be to benefit both the U.S. and Canada with increased gas exploration and development and to ensure more integrated natural gas supply for North America.
While emphatic that the NWT government will steer well clear of Alaska’s decision-making on how best to monetize its gas assets, Bell said he would be surprised if someone doesn’t raise the over-the-top option.
That route was last being debated five years ago when Houston-based Arctic Resources and its Canadian affiliate, ArctiGas Resources, submitted a preliminary application to Canada’s National Energy Board for the Northern Gas Pipeline Project to deliver up to 5.2 billion cubic feet per day of North Slope and Mackenzie Delta gas in a common pipeline along the Mackenzie Valley to southern Canadian and U.S. markets.
The plan called for completion of the Canadian portion by the third quarter of 2007, with an undersea link from the North Slope across the shallow-water Beaufort Sea to Inuvik a year later.
The combined cost at the time was estimated at US$7.9 billion, barely half what the MGP alone would cost now.
Mackenzie would create Alaska options Bell said that once the MGP completed — and he has no doubt it will be — “there will be more options for Alaska to consider.”
“I think it might be time to ask whether (the MGP) is a down payment to get Alaska reserves to market,” he told the Houston conference.
If Alaska’s producers — who hold the key to taking any initiative —and legislators ever wanted to “sit down and discuss the options we’d be more than happy to,” he said.
Noting that Alaska Gov. Sarah Palin is looking at competitive bids for getting Alaska gas to market, he suggested a successful bid would be the one that returned the greatest netback to the people of Alaska.
Bell made it clear that he saw Alaskans filling construction jobs on the MGP because the NWT does not have the population to meet the workforce needs.
Arctic Resources’ proposal called for twin 36-inch pipelines from the North Slope to Inuvik — one of them a backup in the event of a system failure — buried 15 feet under the ocean floor across the shallow Beaufort in water depths of four to 30 feet.
That segment would cover about 300 miles, compared with about 1,700 miles across difficult terrain along the Alaska Highway right of way, Bell said.
In his view “every dollar we can save” merits consideration.
He is also less concerned about the environmental and safety fears of an undersea pipeline break, noting that Russia has made advances over recent years in reducing the risk of ice scouring.
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