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BP not ready to rule out “over-the-top” pipeline Canadian executive says political and technical challenges must be weighed against costs and an opportunity to link the Alaska and Mackenzie Delta basins By Gary Park PNA Canadian Correspondent
Because it favors the most cost-effective pipeline route from the North Slope, BP has not yet precluded the “over-the-top” proposal, said Brian Frank, president of BP subsidiary Gas and Power Canada.
While conceding the emotional stakes in the pipeline debate, he said a final decision must involve the long-term view of gas prices and market fundamentals.
Speaking to industry executives in Calgary, Frank said that although an undersea link across the Beaufort Sea to the Mackenzie Delta faces tough political opposition in Alaska and many technical obstacles, Prudhoe Bay is only 375 miles from the Delta.
As a result, going “over-the-top” offers the advantage of connecting two supply basins in one delivery system, he said.
Notwithstanding Alaska’s moves to impose a legislative ban on the offshore route, Frank said the North Slope study consortium of BP, ExxonMobil and Phillips Petroleum is “working to see what that (option) means for netbacks in Alaska. It is premature to preclude any options at this point. We continue to work all options aggressively.” Project economic at $3 per MCF He said BP has calculated that Arctic gas would be economic at a sustained price of about $3 per thousand cubic feet — slightly below current levels since a dramatic recent slide in prices — adding that “if there’s not an economic project, there’s not an economic project.”
Frank also said BP regards Alberta as a future North American hub for gas marketing and futures once Arctic gas arrives in the province.
He said Alberta could be transformed into a major supplier of gas liquids to a growing domestic and continental chemicals industry.
To that end, BP is studying the most cost-effective means of handling and redistributing Arctic volumes once they reach Alberta.
While open to pipeline competition to move those volumes to Lower 48 markets, Frank was adamant that BP will not allow Arctic gas to be blocked behind existing pipelines out of Canada.
Out of its study, BP hopes to examine additional takeaway options from Alberta to Chicago that would involve a producer-operated and controlled system capable of handling about 4 billion cubic feet per day.
He said the study findings will be used as a “greenfield benchmark” to evaluate fresh proposals from established pipeline players.
Frank said any proposals would have to meet that benchmark, remembering that producers have traditionally “been trapped behind pipe.”
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