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Houston professor pans Alaska Highway gas pipeline project Over-the-top route makes economic sense, would bring more long-term jobs, Ronald Oligney tells Anchorage audience Kristen Nelson PNA Editor-in-Chief
Alaska does not need North Slope gas. It does not need short-term pipeline construction jobs. It does need the jobs gas development on the North Slope would bring, which means the state is shooting itself in the foot by opposing an over-the-top gas pipeline, which is the only economic project, Ronald Oligney told an Anchorage audience Jan. 15.
Oligney, an adjunct professor and director of engineering research development at the University of Houston, is the senior author of a November 2001 study, “The Imperatives of Arctic Natural Gas Development.”
More instate gas will appear, he said, when there is market demand for it. And the state will see far more jobs from long-term gas development on the North Slope than it will from short-term in-state gasline construction.
What about ANS gas? Oligney said there is clearly a demand for more natural gas in the Lower 48 and the price it will take to get Arctic gas to that market, an average of $3 to $3.50 per thousand cubic feet, will be reached in the next 24 months.
The issue with Alaska gas is the other gas in the area, Oligney said: “If you’re an economist, then you believe that some of the closest, cheapest stuff is going to get developed first. You can’t just jump over this (Canadian gas) even though it might be politically expedient or commercially interesting to you.”
Long-term jobs the focus Oligney said he understands why Alaskans are concerned: jobs and instate access to gas.
But the important jobs, he said, are long-term jobs from gas activity on the North Slope. If no line is built, the state misses out on those long-term jobs, which are far more significant than short-term construction jobs. And if the more expensive line is built — the one through Alaska — then there are fewer jobs in the gas industry on the North Slope.
You either spend the money on the pipeline, Oligney said, or you drop it in Alaska in the form of higher netback. That netback is available to reinvest in the industry in Alaska.
“The difference between 25 cents netback and $1.25 netback would be a lot of activity difference on the North Slope,” he said, because money invested on gas development means working drilling rigs, and the multiplier effect creates jobs across the state.
Staged approach advocated Suggestions that a bigger more expensive line is a better project than a smaller line don’t fly because the bigger the project the greater the risk, Oligney said: “Instead of a single, monolithic project, you think in terms of a graduated project.”
Phase one of a multiphase project, a Mackenzie only line, could be operational by 2007.
“It would go a long way, in just developing this one little chunk, to attacking the risk of the entire Arctic development,” Oligney said.
The reserves in the Mackenzie are more than enough to justify a $3 billion phase one pipeline, he said: “You don’t have to define the entire resource if you’re spending money in $3 billion increments. If you’re going to make a $30 billion project, you’d better be sure about the whole resource and how it lays out.”
An over-the-top segment would add Alaska gas as the system expanded, Oligney said.
The instate need for gas What about a gas supply for Alaska?
“The thing I believe is going to change the argument is activity in the Kenai,” Oligney said. “I’m looking for 20 tcf to be announced there in the next two or three years.”
The price of natural gas on the Kenai has been between $1 and $1.50 per Mcf over the last 10 years, he said. “That’s not enough to inspire exploration for natural gas in the Cook Inlet. So the exploration plays that are being drilled today are all very old,” he said.
In 2000, however, there were some price signals for Kenai gas, and now, Oligney said, a number of companies are exploring for gas in Cook Inlet.
“I think that the market’s going to work,” Oligney said: “they’ll be a signal; they’ll be a response; they’ll be new gas discovered.
“And the exposure if you’re wrong is actually very small as well, because we’ve got LNG facilities here — turn those the other direction.
“In the worst case you could bring natural gas to Anchorage for three bucks. In the worst case: if you’re wrong. If the market fails and you don’t find new gas,” Oligney said.
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