BP executive updates Fairbanks chamber on natural gas pipeline

Konrad said Exxon, BP and Phillips hope to have their studies completed by the end of the year and be able to start permitting in early 2002

by The Associated Press

Oil companies evaluating whether a natural gas pipeline should be built from the North Slope to the Lower 48 have not yet found a project that pencils out, a BP Exploration (Alaska) Inc. executive said Aug. 28.

“We’re really at our peak period right now in terms of the studies,” BP Vice President Ken Konrad told a Greater Fairbanks Chamber of Commerce audience.

BP, Phillips Alaska Inc. and ExxonMobil have been working on the proposal since last December.

“A lot of studies are under way and very few are done,” Konrad said.

The three companies are the major owners of North Slope gas. They hope to have their studies completed by the end of the year and perhaps be able to start applying for pipeline permits in early 2002.

Konrad said crews are walking along the proposed routes. “They are looking for cultural resources, understanding river crossings and landowner issues,” he said.

And because a line all the way to Chicago is a possibility, route issues as far away as Iowa and Illinois need to be considered, Konrad said.

The companies have pegged the estimated cost of a pipeline at between $15 billion and $20 billion.

Konrad noted that natural gas prices, which crested at an all-time high of $10.50 per million British thermal units in December due to low inventory and high demand, are now down to around $2.58, the Fairbanks Daily News-Miner reported.

“As we’ve seen in the past 18 months the laws of supply and demand cannot be repealed,” Konrad said. “It’s simply a reminder that we do need to have a cost-effective project.”

Long-term $3 price pegged

Ed Small, an analyst with the state-hired group Cambridge Energy Research Associates, said earlier this month that he expects to see a gas price recovery in the second half of 2002. Current low prices should create both a drop in supply growth in the Lower 48 and an increase in demand, Small said.

Another factor in the evaluation of whether a project can work, Konrad said, is the companies’ proposed federal legislation, which they say would provide needed regulatory certainties.

Some Alaska lawmakers have expressed concern that the proposed legislation would grant an expedited permit process to any pipeline route, including the over-the-top route that is widely condemned in Alaska.

They say the other pipeline route under consideration by the three companies — the Alaska Highway route — is already the subject of a streamlined process set out under a law from the 1970s.

The Legislative Joint Pipeline Committee is slated to meet in mid-September to fully consider the companies’ proposed federal legislation.

Konrad said the draft bill is route-neutral because the companies are still studying both routes. “I think we need to do a better job of educating folks about what the legislation does and does not do,” he said.

Over-the-top bypasses Interior Alaska

That route is about 300 miles shorter than the Alaska Highway option, and Konrad has stated that it appears more cost-efficient.

An offshore survey of the route is under way in the Beaufort Sea.

Alaska lawmakers say the offshore line would be a legal and permitting nightmare and would hamper Alaska’s potential for in-state gas use and pipeline employment opportunities.

The Legislature has passed a bill seeking to prohibit the over-the-top route, and similar legislation has been introduced in Congress by U.S. Rep. Don Young, R-Alaska.

Konrad said the companies are obligated to study more than one route in order to meet regulatory and economic demands.