North Slope producers gasline study on track

Petroleum News Alaska Staff

Dave MacDowell, external affairs manager for the North Slope producers gas study group, told PNA it was “interesting to note the attention, and to some extent, the surprise generated by the information we released over the past several months. … The (July) update was really more of an interim release of numbers than a report.”

The preliminary numbers provided by the Alaska Gas Producers Pipeline Team in July indicated that a gas pipeline from the North Slope to the Lower 48 could cost as much as $15 billion to $20 billion.

Those numbers were rough estimates, MacDowell told PNA Oct. 25. “The costs could be as much as 20 to 30 percent higher — or lower. …

“We are still telling people what we have said from the beginning: This project is not yet economic. It has never been economic. That’s what we’ve been asked to do from the start — find a way to make it economic. … That’s why the producers (BP Exploration (Alaska) Inc., Phillips Alaska Inc. and ExxonMobil) are spending millions of dollars on this. We want to find a way to make the project economic,” he said.

The study group’s budget initially was $75 million, but in a September interview with team spokesman Curtis Thayer, PNA was told that the costs would exceed that number. More than 600 people are working on the study, including the 100 people assigned to the team by the producers and 500 to 600 people who worked during the peak of summer field activity for the team’s contractors in Alaska, Canada and the Lower 48.

“We’re still on track to get our engineering and cost data in by the end of the year. … That’s the culmination of all the work we have been doing. ... At which point we’ll analyze the information and the three companies involved will each do the same. Following that review, “decisions about potential next steps” will be made,” MacDowell said.

“We’re working hard to develop an economic project, but we won’t know if we have one until all the numbers are in,” he stressed.

MacDowell said that a number of things have to come together to make the project economic. Technology plays an important part in the project’s economics, as does “overall risk management.”

Federal regulatory enabling legislation is a “must have,” he said. “It will help create a clear, efficient, regulatory framework. It is an essential part of reducing project risk and assessing economic viability. …The capital side of this thing is huge. We have to look at every opportunity to reduce costs,”

Another critical factor MacDowell identified was state fiscal certainty: “Progress on that will be needed. We are in conversations with the state, of course, and hope they will continue.”