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Meeting highlights gasline challenges; gap in cost of two routes narrows Producers tell University of Alaska workshop current studies based on 4.5 billion cubic feet a day pipeline, up from original 4 bcf proposal Patricia Jones PNA Contributing Writer
Construction technology and related research, project economics and political maneuvering surrounding the proposed Alaska natural gas pipeline project highlighted talks at an energy workshop held April 11 and 12 at the University of Alaska Fairbanks.
University researchers, government officials and research organizers met with oil and gas industry representatives to determine development barriers for Alaska’s oil, gas and coal resources and to identify possible research projects that could help mitigate those blockades.
High on the topic list for the conference was Alaska’s North Slope natural gas pipeline project, which faces substantial economic barriers to its development. An $8 billion spread Early in the two-day meeting, BP Exploration (Alaska) Inc.’s David MacDowell presented the standard overview from the producers’ group, describing it as an uneconomic project under the current analysis that has cost BP, Phillips Alaska Inc. and ExxonMobil Production Alaska a total of $125 million during the last 15 months.
Saying that the final analysis should be publicly released in the next few weeks, MacDowell did give a few hints about the producers’ economic analysis of the approximately 2,000-mile pipeline and related infrastructure.
“The numbers have gone up, but it is still under $20 billion,” MacDowell said.
Part of the reason why the still-secret cost estimates have risen is that producers have expanded the per-day production capacity of the project. Current analysis puts the project at a 4.5 billion cubic foot per day producer, rather than the initial 4 BCF, MacDowell said.
Previous corporate announcements put the estimated development costs of the northern “over-the-top” route, which would include a portion of undersea pipeline to the Canadian north shore, then track south through the Mackenzie River valley to existing gas infrastructure in northern Alberta, at $15.1 billion.
Producers have said the southern route, which would track Alaska’s oil pipeline to Delta Junction, then follow a federally approved route along the Alaska Highway to northern Alberta, would cost an estimated $17.2 billion.
“I will tell you that the gap (between the two routes) has narrowed,” MacDowell said.
And the producers have tightened the range of uncertainty in their figures, he added, refining the numbers to a 20 percent uncertainty, down from 25 to 30 percent in the earlier numbers. “On a $20 billion project, that’s an $8 billion spread,” MacDowell said. “That’s some serious dollars.” Trenching precise In view of the research-oriented workshop, MacDowell briefly described trenching experiments conducted by the producers’ group this spring in permafrost areas both on the North Slope and just north of Fairbanks. (See related article in the March 17 edition of PNA.)
A huge, 260,000-pound trenching machine dug through varying types of frozen ground, MacDowell said, testing the equipment’s ability to work in the different types of permafrost.
The machine dug exacting, five-foot wide trenches, eight to 12 feet deep, he said. “It’s really impressive — the linear, precise cuts,” he said, in an interview following his presentation.
Important in the evaluation is the trenching machine’s efficiency. If crews can complete more miles of pipe installation in a day, then perhaps the construction timeframe for the entire project can be shortened, MacDowell said. “We’re still evaluating the results, but we’re hopeful that we’ll be able to make technology improve the economics.” Producers-pipeline meeting Also presenting information about the gas pipeline project at the two-day conference was Sally Kornfeld, senior analyst with the U.S. Department of Energy’s Office of Natural Gas and Petroleum.
One recent development in the overall hoopla surrounding the pipeline project, she said during her presentation, is an upcoming meeting between the North Slope gas owners and the pipeline companies consortium, which includes Foothills, Williams and a whole host of other companies. Scheduled to meet in Anchorage on April 16, the two groups are expected to take another stab at negotiating some sort of development scheme, she said. Results of an earlier meeting in January were not released, because, Kornfeld said, the consortium had stated that they would “negotiate with the commercial partners, but not in the press or in the government.” Pipeline proposal refined She did say that the pipeline consortium “had further refined their proposal, based on feedback from the producers’ group during the January meeting.
“You can gather that the producers wanted a higher volume (of production and pipeline throughput),” Kornfeld said, in an interview after the conference. “If you wanted to do business with the people who have the gas, you’d go in the direction they were going.”
The Foothills group has already plunked down several million dollars in reimbursable deposits to start the government regulatory and permitting process, Kornfeld said. That includes $5.5 million to the state of Alaska for creation of a gas pipeline office, and an unspecified amount also in the multi-million dollar range to the Canadian government, she noted in her presentation.
“They put $5 million down and that sounds serious, but they have not yet made a decision,” she said. “Obviously they are moving in that direction.” DOE loan guarantee a possibility The pipeline consortium, or any other development group, could benefit from a proposed amendment to the national energy bill currently being debated. Under that bill, a development group could receive up to $8 billion in a federal loan guarantee under the Department of Energy.
“That’s something that the Secretary of Energy is not in the practice of doing,” Kornfeld said. The loan guarantee includes an interesting provision — should no one apply for the $8 billion loan, then a study is to be conducted to determine whether the federal government could build the pipeline.
During the energy workshop, Kornfeld also presented a list of research and development needs that could assist design and development of the pipeline project.
“I got these from an informal survey of the companies — they are ideas directly from the interested parties,” she said.
And during her presentation, she said that her survey suggestions were immediate needs, quoting one of the stakeholders saying, “‘These are areas that if we had the answers, we would use the information today.’”
Those research needs fell into seven categories. They include mitigating proximity to the existing oil pipeline, stream crossings, construction engineering, economic and social impacts, identifying and mapping geotechnical regimes, researching soil and pipe interaction forces generated by the freeze-thaw cycles and statistical trending and forecasting of expected seasonal weather.
Kornfeld also added her own suggested research and development need — looking at security options for the pipeline system.
“This is really exciting — it’s important to the country and a lot of people want to see this happen,” she said. “If the state or federal government approves an appropriate incentive or the companies can bring down the cost, or a combination of the two — it might happen sooner than later. But then again, it might not.”
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