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Denali sends 2nd report to legislators BP-ConocoPhillips JV has spent $120 million in advance of 2010 open season; has nearly completed cost estimates for pipeline, GTP Kristen Nelson Petroleum News
Bud Fackrell, president of Denali, told legislators in a Nov. 11 letter that the BP-ConocoPhillips-owned project has spent $120 million to date in advancing the gas pipeline project from the North Slope to market toward a 2010 open season.
He said work to estimate the cost of the pipeline and the gas treatment plant is “nearing completion,” with Denali’s own expertise augmented by a Flour-WorleyParsons joint venture on the GTP and Bechtel on the gas pipeline.
Denali’s focus is on “preparing a credible cost estimate” as the basis for the company’s open season commercial offering. And Fackrell said the company has “initiated pre-open season discussions with potential anchor shippers and is formatting its open season plans.”
Both in Fackrell’s cover letter and in the report Denali noted that it is moving forward outside of the Alaska Gasline Inducement Act and without monetary assistance from the State of Alaska, with investment in the project 100 percent funded by the company’s owners, BP and ConocoPhillips.
A report on the AGIA-licensed project, being developed by TransCanada and ExxonMobil, was sent to legislators at the end of October; see story in Nov. 15 issue.
Denali said it continues to work closely with federal and Alaska agencies “to ensure a common understanding of the framework for the required regulatory approvals” and has made significant progress in Canada “to advance and coordinate the regulatory review framework.”
Most field work done Denali said it completed a full season of field data acquisition in 2008 between Delta Junction and the Canadian border.
“Because of the significant amount of data collected in 2008, Denali was able to collect much of the information it requires to advance the pipeline design in preparation for open season. Consequently, field data collection in 2009 has been on an as-needed basis,” the company said.
Denali’s engineering work started with work done by BP, ConocoPhillips and ExxonMobil during the companies’ joint work in 2001 and 2002; the company said that work has been augmented with later studies by BP and ConocoPhillips, historical data from owner companies, new data gathered in field programs, input from company experts, services of engineering firms and input of expert contractors.
Gas treatment plant The multibillion-dollar gas treatment plant will be at Prudhoe Bay.
“It will be more complex and much larger than any oil and gas facility in Alaska and the largest plant of its kind in the world,” Denali said, designed to process in excess of 4.5 billion cubic feet per day of natural gas.
In addition to professionals seconded to Denali from BP and ConocoPhillips, Arctic Solutions — a joint venture between Fluor and WorleyParsons — is supporting the GTP engineering work, along with CH2MHill’s Anchorage office for assistance with Alaska construction issues.
The GTP will consist of several dozen modules preassembled at fabrication yards and brought to the North Slope by sealift, Denali said, with the largest of the modules to be the largest module ever sealifted to Prudhoe Bay.
The company said the plant will require multiple sealifts and will comprise the largest sealift effort in Alaska history.
Among the specific GTP tasks completed that Denali listed: major GTP equipment and costs identified and logistical costs and sequences estimated; on-site surveys of fabrication yards completed; module layouts and site plot plans developed; and camp, warehouse and office requirements defined.
Pipeline and compressor stations On the pipeline side of the project Bechtel has been brought in to support the efforts of experts seconded from BP and ConocoPhillips.
A multiterabyte technical geospatial information system, tGIS, is being used in the analysis of the pipeline route and in preparation of cost estimates. The database for the tGIS includes aerial photography, satellite imagery, base maps, topographic information, fault data, digital elevation models, borehole data, terrain analysis, engineering information, land ownership data, archaeological features, wetlands data, stream crossing data, contaminated site information, existing infrastructure data, historical pipeline routes, wildlife observations and other information required for engineering of the pipeline and compressor stations.
Denali said it has “developed its own thermal-hydraulics software for modeling flow through the pipeline,” and has used the model to locate compressor stations and predict pipeline pressures and temperatures along the route.
All major equipment and buildings have been identified and a study identified “spacing requirements for all equipment and buildings within the compressor stations, including building blast requirements, setbacks from process units and fencing criteria.”
Denali said it has also developed an operations and maintenance strategy, “a comprehensive document outlining how the project will be operated and maintained throughout its life.”
“Denali has developed an operational philosophy for remote operations bases … required to support the pipeline. Each ROB will likely be located in or near communities along the pipeline route,” the company said.
Market updates Denali said that emergence of new sources of unconventional gas and the potential for import of large volumes of liquefied natural gas have “the potential to change the perception of the long-term market for North American natural gas. The combination of reduced demand and growth in supply from shale gas and LNG imports raises questions about the competitiveness of natural gas delivered from North Slope sources over the life of the project.”
Denali said that one of the few publicly available long-range natural gas price forecasts, that from the U.S. Department of Energy’s Energy Information Administration, “does not represent a consensus view of the market. Ultimately, it is the shippers who will assess the economic viability of the pipeline based upon their own proprietary market perspectives as they determine whether or not they are willing to make the multibillion dollar, multiyear commitments that will be required to finance and construct the project.”
Denali said the EIA long-range market price forecast has not changed significantly over the last six months.
“However, the recent natural gas price volatility combined with the potential for new supplies of natural gas to compete with Alaska natural gas has highlighted the market risk potential shippers face.”
Denali also said it has nearly completed its work to revise the cost estimate and schedule for the project.
“The revised cost estimate and schedule will represent a substantial advancement over prior work and will form the basis of Denali’s commercial terms,” the company said.
That work will be available to prospective shippers during the company’s 2010 open season.
Plans for coming months Denali said it will be completing its project cost estimate over the coming months, as well as advancing regulatory planning with state, federal and Canadian agencies.
The company will continue its engagement with key stakeholders, including communities, governments, Alaska Natives and Canadian Aboriginal groups.
It will continue to discuss pre-open season needs with potential shippers and will advance commercial and regulatory preparations for open seasons in Alaska and Canada.
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