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BP aggressively planning gas pipeline from Alaska to Alberta Company’s Dick Olver tells Alliance goal is gas delivery by 2007, cites alignment with partners, says BP will work with governments along line Kristen Nelson PNA News Editor
BP’s 10 trillion cubic foot share of Alaska North Slope natural gas figures in the company’s plans to sustain the growth of its gas supplies and Dick Olver, BP executive vice president and managing director, head of BP’s worldwide exploration and production, was in Alaska Sept. 20 on his way to Canada to deliver the message in person: “We are,” he said, “aggressively planning a gas pipeline from Alaska to Alberta.”
It’s no longer a question of “if” North Slope gas will be developed — it’s now a question of “when” North Slope gas will be developed, Olver told the Alaska Support Industry Alliance.
And, he said, BP’s answer to “when” is no later than 2007. In fact, Olver said, he’d prefer to see North Slope natural gas delivered by 2006.
BP told analysts in July that it is targeting gas growth in the range of 8-10 percent a year between 2000 and 2003. Beyond 2003, supplies from Trinidad will increase and then, in 2006-7, Alaska gas supplies come into the company’s supply plans.
With the Amoco merger and the ARCO acquisition, gas has grown from less than 20 percent of BP’s production to more than 40 percent and the company has the largest gas supply position in North America.
Soon, Olver said, gas will represent 45 percent of BP’s portfolio, “and we plan to be the No. 1 public company in gas by the year 2007. Our portfolio for growth represents a bias for gas.” Lower 48 needs frontier gas Olver said that while BP is the largest supplier of gas in North America, the market is so fragmented that “largest” means 6 percent. The majority of the U.S. gas supply, almost two-thirds, comes from independents, he said.
Why Alaska gas? Won’t higher prices produce more gas exploration and production in the Lower 48? Current high natural gas prices will drive exploration in the Lower 48, Olver said, but gas prices will eventually soften and the easiest gas basins in the Lower 48 are mature, making remaining gas resources there more expensive to produce. Economic growth and demand, he said, dictate that gas supplies for the Lower 48 will need to include LNG imports and frontier gas from the Mackenzie Delta and Alaska. Aligned with partners A pipeline is one of three ways to get North Slope gas to market, and BP has committed more than $60 million for Alaska gas-related projects and research in 2000 in pursuit of all the options, Olver said: liquefied natural gas, gas-to-liquid and a gas pipeline to the Lower 48.
It’s that gas pipeline, he said, which is perhaps the most discussed option for commercializing North Slope natural gas. BP, he said, has initiated a major study in Alaska and in Canada to build a pipeline from Alaska’s North Slope to western Canada. That pipeline would have capacity of up to 4 billion cubic feet a day, would cost about $10 billion and would operate for at least 30 years, beginning in 2006 or 2007.
“We’re aligned with our partners in getting gas to the market, so long as the economics hold up,” Olver said. That alignment is beyond the alignment achieved earlier this year in Prudhoe Bay ownership. BP has been meeting, Olver said, with ExxonMobil and Phillips, the other two major owners of North Slope gas, and more meetings are planned. Oil not being neglected BP is not, however, neglecting North Slope oil in favor of gas, Olver said, but is determined to stem the decline from existing fields. BP told analysts in July that it is confident that core areas will stay flat or rise slightly, and mentioned specifically the North Sea and Alaska.
BP spending for Alaska will be up from $650 million in 2000 to $700 million in 2001, Olver said, and reservoir penetrations, which will top 40 this year at Prudhoe Bay will set an all-time record next year. And the rig count — five last year — will rise to 13 next year, including three coiled tubing rigs.
Olver said BP plans to use Prudhoe Bay as a laboratory for new technology to be used globally. A lot can be done there, he said, with multi-lateral drilling, extended reach drilling and ultra-extended reach drilling.
Prudhoe Bay offers two advantages for trying out new technology compared to an area like the deepwater Gulf of Mexico, Olver said: First, you don’t have 6,000 feet of water under your feet; second, coiled tubing wells in Alaska can be done for $1 million, compared to $50-$100 million in the deepwater Gulf of Mexico. Production increase targeted BP told analysts in July it expects to realize synergies of $100 million a year from the changes in its Alaska holdings — selling oil reserves in return for a greater interest in the gas resources in Prudhoe Bay and Point Thompson and becoming the single operator for the Prudhoe Bay field and for the greater Prudhoe area.
BP’s lifting costs in Alaska are forecast to be reduced from $3 a barrel to $1.5 a barrel, with another 20 cents a barrel improvement from marine costs, the company said.
BP Exploration (Alaska) spokesman Ronnie Chappell told PNA Sept. 26 that BP hopes to get its production, currently about 300,000 barrels a day net to BP, up to 350,000 barrels a day in 2002. The increase, he said, would come from Northstar, scheduled to begin production in 2001, from Prudhoe Bay and Kuparuk satellites, and from growth in viscous oil production. Among Kuparuk satellites, Chappell noted that Phillips Alaska is pursuing development of the Meltwater development, where BP has a 40 percent interest.
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