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Vol. 12, No. 3 Week of January 21, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

MEET ALASKA 2007: Our silver linings come with clouds

Paul Laird

General Manager of The Alliance

For every cloud, there’s a silver lining … but for every silver lining, there’s also a cloud.”

That reminder from one of my professors in college seems particularly apropos for Alaska’s oil and gas industry as we begin a new year – and a new era.

At a time when demand for natural gas is growing steadily, we’re blessed with tens of trillions of cubic feet of known gas reserves on the North Slope and perhaps hundreds of trillions yet to be discovered … but we still have no pipeline to get it to market or a fiscal contract to facilitate construction of a pipeline project.

We overcame an initiative to impose a massive tax on gas reserves that would have stalled a project for years … but we’re still running out of time for getting a pipeline built. Steel costs have soared, jeopardizing project economics, and some Midwest utilities already are making long-term commitments for other energy sources. The threat of being displaced from the market by LNG imports also is increasing.

We’ve got billions of barrels of known oil resources, including more than 10 billion barrels of heavy oil on the North Slope … but each new barrel is more expensive to recover than the last.

Lots of players, but lots of concern

More companies than ever are joining the search for oil from the National Petroleum Reserve Alaska to Cook Inlet and from the Chukchi Sea to Bristol Bay … but independents and majors alike are reassessing investment plans in the wake of the largest oil tax increase in Alaska’s history. We face intense global competition for investment capital. And infrastructure is aging.

Industry and the state alike have reaped the bounty of record-high oil prices … but state government spending has overcome the challenge of rising revenues. And prices have fallen. We still have no fiscal plan, either. But we’ve got plenty of political uncertainty.

Build gas line soon

In this period of unprecedented possibilities and peril, the Alliance continues to advocate a gas fiscal contract that encourages the earliest possible construction of a pipeline, promotes the use of Alaskan contractors and suppliers, provides for in-state access to gas supplies and provides for third-party access and expansion capability.

We believe a “highway project” with a pipeline traversing Canada and supplying the Lower 48 is the only viable option for commercializing North Slope gas. It would yield the greatest revenues to the state and lose less than half as much gas through liquefaction and fuel use as a liquefied natural gas scheme.

The Alliance continues to advocate a competitive investment climate for oil and gas, a long-range fiscal plan that includes the use of excess Permanent Fund earnings and legislation to increase workforce development.

We look forward to an era of “renewed energy” toward achieving these goals and to working with Gov. Palin and Lt. Gov. Parnell to transform the extraordinary potential of our oil and gas resources into generations of prosperity for all Alaskans.



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