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State can’t force a gasline project to happen Williams executive says the key to putting a project together is to find financing; to do that, you need long-term gas supply contracts with North Slope producers Kay Cashman PNA Publisher
Cavan Carlton, director of gas pipeline business development for Williams, told PNA last week that his company is “not interested in making an end run around” the three North Slope gas owners to build a natural gas pipeline from Alaska’s North Slope to the Lower 48.
The ability to put together a North Slope gas commercialization project “revolves around the ability to get this project financed. Financing will only be available if you have long-term gas supply contracts with the producers,” Carlton said.
When asked who is most likely to own the North Slope gasline, Carlton said, “right now the producers are conducting a financial feasibility study on their own with limited input from the pipeline companies.
“But nowhere in North America are long haul (interstate), large diameter gas pipelines owned by a producer. … It’s we and our peers who have an appetite to invest capital in pipeline projects. There are very few instances where producers share the investment and no instances where they are gas pipeline owners,” he said.
“If this project is going to move forward, only one scenario will work — the pipeline companies and producers will, in the end, come together to find a way to make it work.” Very high risk project When asked what was a reasonable rate of return on an investment in a North Slope line, Carlton said “a net hurdle rate of 15 percent was probably on the high end for long haul gas pipelines (but) … you have to look at the level of risk you’re asked to take. The North Slope gasline will perhaps be the riskiest ever built. Whoever bears that risk is going to have to earn an appropriate return. Fifteen percent is not necessarily too high.”
When PNA repeated Ken Thompson’s recent remarks to representatives of the three North Slope producers at a meeting of a subcommittee of the Governor's Alaska Highway Natural Gas Policy Council — “Thank you, we see it isn't commercial for you. You tried. Save your capital for exploration and production. We'll find pipeline companies that can get this gas to market.” — Carlton said, “I was at that meeting. Ken Thompson made a lot of good points. He is a very credible and reputable individual to advise the governor on this, but I hope no one loses sight of this: You can’t force the producers to make this project happen, unless the producers, at the end of the day, are agreeable to work with you. You can’t force them to give you long-term contracts for gas for this pipeline. You can only push so far before the producers close down the project. That is a real risk and I think it has to be managed.”
Governor meets with pipeline companies Carlton was one of several major pipeline company executives who met with Gov. Tony Knowles in mid-September.
“It was a brainstorming session. The governor wanted to check the pulse of the pipeline companies, to see what their true level of interest is in this project,” he said. “We — Williams — have been meeting with the governor off and on for quite some time, but he hadn’t yet talked to all the pipeline companies in an open forum.”
Bob King, Knowles press secretary, told PNA Oct. 2 that the governor was “very encouraged” by the outcome of the meeting.
“All the different operators were very bullish at the prospect of a pipeline to carry Alaska natural gas to the Lower 48.”
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