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Williams wants to operate gasline Carlton says consortium represents entire North American pipeline industry; it’s ready to “build the biggest and the best pipeline in North America” Kay Cashman PNA Publisher
The company which spearheaded the original 1,700 mile Alaska Highway natural gas pipeline project in the mid-1970s is interested in resuming its leadership role and operating the Alaska portion of that pipeline.
“Speaking on behalf of Williams, it is our desire to operate the gas pipeline,” Cavan Carlton told PNA Nov. 20. Carlton is the Arctic project director of gas pipeline business development for Williams, which is set to have the largest ownership position — 21 percent — in the consortium of major U.S. and Canadian pipeline companies that signed a memorandum of understanding in mid-November to proceed with the development of a proposal to transport Alaska North Slope gas to markets in Canada and the Lower 48 states by 2008.
Which of the nine firms would operate the line is still to be determined, he said. “We want to be the leading company in Alaska on this project. We already have a big presence in the state with a half billion in assets and over 500 employees here. We already own a piece of the TAPS line,” Carlton said.
Williams is the nation’s second largest-volume transporter of natural gas and was the project director in the 1970s of the Alaska portion of the Alaska Natural Gas Transportation System from the mid-1970s until 1994.
The nine firms which signed the MOU are the original ANGTS partners. The six U.S. energy companies are subsidiaries of The Williams Companies, Duke Energy, Sempra Energy International, Enron, PG&E Corp. and El Paso Corp.
The three Canadian companies are Foothills and its joint owners, TransCanada PipeLines and Westcoast Energy (which has scheduled a Dec. 15 shareholders’ meeting to approve a takeover by Duke Energy).
Under the terms of the agreement, Carlton said the companies “are prepared” to dismiss $4 billion in costs and interest associated with the dormant project that would have been charged to developers of the pipeline. The money “represents more than 20 years of interest charges” on their original investment, with interest.
Williams wants petrochemical facility at North Pole In addition to taking the lead position on the pipeline project, Williams is also evaluating the construction of a world class petrochemical facility near its existing North Pole refinery which would utilize the natural gas liquids from a North Slope gas pipeline.
The petrochemical facility would “likely be an ethane based industry manufacturing polyethylene pellets” that could be shipped to markets around the world, Carlton said. A portion of the byproducts of processing the natural gas stream to remove ethane — methane, propane and other heavier NGLs — could be made available for local use, such as “natural gas or propane based heating or power generation,” he said.
If a petrochemical plant were built in the Fairbanks area it could mean 350 full time jobs and a potential payroll of $18 million a year and $15 million paid to the Alaska Railroad for transportation, Carlton told a July 18 meeting of the Alaska Legislature’s Joint Committee on Natural Gas Pipelines.
Enough for Alaska and Alberta Carlton told committee members that a world class ethane cracker in Alaska would utilize just 20 to 30 percent of the ethane from the natural gas stream flowing through a North Slope gas pipeline, leaving enough for the giant liquids extraction plant in Alberta that has been tentatively proposed by the North Slope producers.
“It’s not an either or proposition in Alaska and Alberta. All indications are that there will be enough liquids in an Alaska gas pipeline to go around,” he said.
Carlton stressed that while “several hurdles have to be cleared in order for a petrochemical facility to materialize,” Williams is pressing ahead with project evaluation.
Ready to build the pipeline Carlton said the MOU is aimed at the nine companies building, owning and operating a highway delivery system that will meet the needs of the North Slope producers.
Ownership for the producers is “not off the table,” he said, despite the fact that “long haul, interstate gas pipelines in North America are exclusively owned and operated by natural gas pipeline companies,” not producers.
“One of the things we are hoping to do is to engage the producers as soon as possible in meaningful discussions to help flush out project design, ownership and other issues,” he said.
“It is very important to note that our intention … is to work with the North Slope producers. Under no circumstances are we trying to work without them because you can’t. This project will only work if you have people willing to build it and people willing to put their gas in it,” Carlton said.
“We have the capability as pipeline companies to build whatever pipeline is necessary to move the volume of gas and the quality of gas that the producers are ready to ship. … We have brought to the table the entire North American pipeline industry. We are ready to build the biggest and the best pipeline in North America,” he said.
The group intends to make a preliminary proposal to the three major North Slope producers — BP, ExxonMobil and Phillips — by the end of the year, Carlton said.
Can the consortium design a commercially viable project?
Yes, Carlton said.
“That’s the reason we have come together to dance at this ball. We feel there is a commercial project out there and we are committed to do whatever we can to make it happen,” he said.
“Much of what defines a commercial project centers around people’s perceptions of long-term gas prices. No one controls price except the market. Every company has a different view of what gas prices will be in 2008, 2009,” Carlton said. Williams takes a long term view of the gas market and is “very confident that gas demand will continue to grow in America.”
Foothills spokesman Rocco Ciancio said Nov. 15 the consortium estimates an Alaska Highway pipeline would cost $9.7 billion to construct.
What about the gas explorers? What about new sources of gas from North Slope explorers such as Anadarko Petroleum Corp.? Will the consortium be able to provide affordable access to new gas reserves as they come online?
“This project will be open access. … Obviously it is our desire and in our best interests to build an efficient pipeline and appropriately expand that pipelines, as needed. …We have doing that at Williams for over 50 years. For example, we have expanded several times the size of the Transco pipeline — the largest gas line in North America. … More recently, in the last 5 or 6 years, there have been significant expansions every year,” Carlton said.
Which line first? Which gasline does he think will be built first: The pipeline from the Mackenzie Valley to Alberta or the Alaska Highway line from the North Slope to Alberta?
“Both lines can and should get built,” he said. “… But our view is that we have a significant timing advantage over the Mackenzie pipeline,” he said referring to the regulatory and diplomatic framework in place since 1976 for ANGTS.
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