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Arctic gas on the menu TransCan execs say Alaska, Mackenzie essential for NA energy supply Gary Park For Petroleum News
Alaska and Mackenzie Delta gas, along with shale volumes from the United States and Canada, could play an essential role within the next decade if North America is to meet the “big challenge” of offsetting a 20 percent annual decline in its supplies, TransCanada Chief Executive Officer Hal Kvisle said Nov. 18.
He said the northern gas (4 billion cubic feet a day from Alaska and the 1 bcf a day from the Mackenzie Delta) would account for only one-third of the 15 bcf per day of new gas needed “just to maintain flat supply” in North America.
“That’s where we see an easy niche for some of the northern gas projects to come on stream in the next 10 years,” Kvisle said.
Chief Operating Officer Russ Girling, speaking to the same investor day seminar, said TransCanada believes that regardless of rapid growth in shale volumes, Arctic gas “is still going to be needed.”
He said that in a “no-growth scenario” for North American demand, the continent must replace 100 percent of its supplies every five years.
“A combination of Mackenzie and Alaska gas … is a critical component of North American energy supply and security,” Girling said, noting that is why the resource is viewed by governments as “very important.”
Pitching TransCanada Making TransCanada’s pitch as the best candidate to carry Arctic gas, the two executives said the company’s network taps into “virtually every major North American natural gas supply basin and provides our customers with unparalleled access to premium markets.”
They said TransCanada is also “very well positioned to connect new sources of supply such as shale gas and northern gas to growing markets.”
Noting that TransCanada’s mainline system is currently running at about 1 bcf per day below capacity, Kvisle said that unused space means TransCanada is “able to take shorter-term contracts and volumes that someone seeking to build a new pipeline to bypass our system.”
But the TransCanada Web cast emphasized that moving ahead on Alaska will be tied to results of an initial open season, which should be concluded by July 2010, while the destiny of the Mackenzie Gas Project hinges on the expected release of a final report by the Joint Review Panel on environmental and socioeconomic issues in December and a deal between the Canadian government and project proponents on an acceptable fiscal framework.
Kvisle described the two projects as “very big stuff” and “long-term initiatives.”
“Inevitably at the end of the day some of the producers will want to participate in the projects, so I don’t expect TransCanada will have 100 percent of either one,” he said.
Electricity biggest demand Providing an outlook for North American gas, Kvisle said the demand for gas-fired electricity will be the largest source of growth in the 2009-20 period, while residential and commercial needs will remain “essentially flat” because of new efficiencies.
He said Mexico is expected to remain unchanged at 5-6 bcf per day, while the U.S. Gulf of Mexico will continue a very rapid decline that is now in the range of 30-50 percent a year for most fields and the U.S. Midcontinent has also been in rapid decline.
“The very best gas reservoirs in the U.S. were developed a long time ago,” he said, adding the industry is moving to “smaller and smaller pools that are just not big enough to offset declines.”
Kvisle said U.S. shale output, which ranges from 4-6 bcf per day currently, should grow to 12-15 bcf per day by 2020, “but like all other sources there is a pretty relentless decline in those wells from the day they come on stream.”
He said significant growth in the U.S. Rockies region has slowed because “weak gas prices have dampened drilling activity.”
Despite the frantic pace of activity, Kvisle said British Columbia’s unconventional gas in the Horn River, Montney and other plays will “obviously not dominate the supply mix,” but, along with northern gas, will help keep the TransCanada pipelines out of Western Canada operating at capacity.
He said major new infrastructure will be needed in North America because so many power plants built in the 1965-80 period will “reach end of life over the next decade and have to be replaced.”
Kvisle said the “appetite for life extensions at old coal plants is diminishing more and more. We will likely see them shut down and probably converted to natural gas-fired plants,” driven to a large extent by climate change and environmental policies, he said.
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