CERA expects producers to move gas to Alberta

Kristen Nelson

Alaska producers will probably be the drivers behind a gas pipeline from the North Slope — but will probably move the gas only as far as Alberta. That is the opinion Ed Kelly, director of research for North American gas for Cambridge Energy Research Associates, presented to Senate Resources Feb. 28.

“We do believe that the producers will be the drivers of this project and — if it is worth it to the producers to build this amount of pipe to get gas to the nearest competitive market then the project will be driven forward. If it isn’t, it won’t be,” he said.

The producers will have to look at the market at least seven years out, Kelly said, and believe netback to wellhead will provide an attractive rate of return.

“They want to see netback that will not only provide an attractive rate of return to Alaskan gas but will provide a rate of return that wins the capital allocation arguments that will happen inside their own corporations, so Alaska gas development has to compete favorably with deepwater Gulf development, West African oil development — with projects worldwide in their own capital allocations process,” he said.

The nearest competitive market is Alberta, and Kelly said he would expect the producers to build that much pipe. Then the gas could move along existing systems: into California and the Pacific Northwest; into the Midwest and the Chicago market; or across Canada into the U.S. Northeast.

Asked about the impart of 4 billion cubic feet a day from Alaska on prices, Kelly said there would be some effect — but seven years out the U.S. market is expected to be a 70 billion cubic feet per day market, so Alaska would be a 6 percent supply addition.