New dream emerges to tap U.S., Canadian Arctic gas

Texas-based group proposes link by 2005; analysts doubt target is realistic; Canadian pipelines tout benefits of collaboration

Gary Park

PNA Canadian Contributing Correspondent

A Texas-based group is attracting a guarded response in unveiling the latest bid to ship natural gas from Alaska and the Canadian Arctic to southern markets.

The ambitious scheme is aiming to start deliveries to U.S. and Canadian markets in 2005. It involves an C$8 billion pipeline extending 1,400 miles from Prudhoe Bay, under the Beaufort Sea and down the Mackenzie Delta to the southern Northwest Territories, where it would link up with Canada’s domestic and export delivery network.

It follows a similar route to one proposed in the 1970s by Canadian Arctic Gas Study that never got off the drawing board.

Operating under the name Alaska Resources, the new venture is headed by Texas investment bankers and claims to have received a warm welcome from potential New York investors.

Alaska Resources president Bob Murphy, who is also president of Houston-based Municipal Energy Resources, said it will likely take another year to determine if the project will proceed to the next stage.

The pipeline would have capacity of 6 billion cubic feet per day, starting at 4 billion cubic feet, Murphy said.

Harvie Andre, a former Canadian cabinet minister, has been hired to advise Alaska Resources on its dealings with Canadian regulators.

He said “we’re talking a very large, very expensive, very big project ... there’s no question about it.”

But he argued the “economics make sense” when the estimated 20 trillion cubic feet of marketable gas in Prudhoe Bay is combined with 150 trillion cubic feet in Canada’s Northwest Territories and Arctic islands.

Canadians favor collaboration

At an October conference in Calgary, Bob Reid, TCPL’s senior vice-president of northern development, said he doubted any one company could tackle a pipeline into Canada’s Arctic Circle.

Westcoast Energy vice-president Wayne Soper said “there is a need for new models in the North and clearly collaboration is that model,” adding: “Pipelines will have to be very competitive is meeting the requirements of producers in their netback options.”

Wayne Sartore, vice-president of development with Enbridge — so far the only company operating crude and gas pipelines in Canada’s Arctic — said he believed the three major Canadian pipelines would “all be parties” in any project to tap natural gas in the Northwest Territories and the Yukon.

The Alaska Resources idea is being floated as interest reawakens in exploring north of the 60th parallel in Canada. Major players are being lured back to the region as gas prices have soared and a series of major discoveries has been made in the Northwest Territories.

Obstacles litter the pipeline path

John Mawdsley, with FirstEnergy Capital in Calgary, said a pipeline could spur exploration, although “the logistics are not trivial.” He said the obstacles range from Canadian and U.S. jurisdictional issues, environmental concerns and the tangle of regulatory challenges in the NWT relating to aboriginal land claims.

Roland George, author of a recent Purvin & Gertz study of Arctic gas potential, doubted a 2005 deadline was realistic for building a pipeline from Prudhoe Bay to the Mackenzie Delta, given the political, social, technical, environmental and regulatory considerations.

But he said a pipeline “will eventually come down ... once you can get a price for the gas that is higher than the cost. It’s too large a resource (to remain undeveloped).”

David Pursell, an analyst with Simmons & Co. in Houston, cautioned the sheer size of the project could also drag gas prices lower if it ever began operating. He said a 10 percent increase in current U.S. gas demand of 60 billion cubic feet per day “is a recipe for cratering gas prices.”