|
Alaska could lose out to LNG FERC chairman concerned political complacency and influx of LNG could see Alaska gas pipeline delayed by two years or scrapped altogether; top federal energy agency disagrees Gary Park For Petroleum News
Complacency among Alaska lawmakers and the expected rapid growth in U.S. imports of liquefied natural gas could delay completion of an Alaska natural gas pipeline by two years and perhaps derail the project altogether, says U.S. Federal Energy Regulatory Commission Chairman Joseph Kelliher.
Speaking to a Global Business Forum in Banff, Alberta, on Sept. 22 he expressed particular concern that the Republican and Democratic contenders to replace pro-pipeline Alaska Gov. Frank Murkowski, have committed themselves to a review of the US$25 billion pipeline.
Kelliher said he fears that shift of direction could become the biggest obstacle to starting deliveries of North Slope gas to the Lower 48 before 2015, given that it will take at least seven years to design and build the system from the time regulatory and corporate approval is given.
He said he hopes the state Legislature “will show good judgment, but I’m pessimistic,” adding he thinks a pipeline “may be significantly delayed.”
Legislators don’t see LNG as competition Kelliher said the complacency among legislators is reflected in the fact that they do not see LNG as competition for Alaska gas.
In a July report to Congress, FERC warned “any further delays may serve to make the (pipeline) uneconomic in comparison to LNG imports. … Alaska is at risk of being marginalized in the search for new natural gas supplies.”
Reinforcing the FERC message that a window of opportunity is closing, Kelliher said LNG imports could increase rapidly, from 1 percent of the North American market in 2001 and 3 percent this year to meet 24 percent of total demand, raising serious questions about the project’s economic viability.
EIA is of a different opinion
But the federal agency that analyzes energy issues has a somewhat different take on the matter. In its International Energy Outlook 2006, released this past June, the Energy Information Administration said “rising natural gas prices make it economical for two major North American pipelines that have long been in the planning stages to come online.”
According to the EIA report, rising Canadian demand, particularly in the oil sands industry, and declining output from the Western Canadian Sedimentary Basin will leave little gas for export to the United States in the coming decades. While Canada exported half its production to the United States in 2003, the agency said, that country will consume 85 percent of its output by 2030, leaving just 15 percent for its southern neighbor. And that includes production expected to come from northern Canada via the proposed Mackenzie gas pipeline.
Adding to that, LNG cargoes may not be easy to come by in the coming decades. Utilities in Japan and Korea have signed long-term contracts for much of the production from Sakhalin, Gorgon, and other big projects. India and China, as well as Europe, are looking to import large amounts of clean-burning gas from LNG for power generation and industrial production, and that may leave little for the more distant U.S. ports.
Mackenzie said to be more advanced David MacInnis, president of the Canadian Energy Pipeline Association, said that despite falling behind schedule, the Mackenzie Gas Project is more advanced than the Alaska plan and more able to withstand competitive pressures of LNG imports.
But he said the Mackenzie venture also faces public indifference, with too many Canadians believing the project will benefit only the Northwest Territories and Alberta.
MacInnis said he would not be surprised to see the Alaska pipeline stalled by as much as three years.
His association predicted last year that combined two-year delays in the Mackenzie and Alaska pipelines and new LNG terminals could hike energy costs to Canadians by C$57.7 billion over the next 20 years.
| 