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Enbridge wants in on Alaska gas
Larry Persily Petroleum News government affairs editor
Alaska has another company willing to join in on developing a natural gas pipeline from the North Slope. This week’s entrant, Enbridge Inc., says it isn’t looking to build the line by itself but would like to join whatever partnership puts together the project.
“We think that’s the more reasonable way to go, given the size of the project and the risks involved,” said Jim Rennie, spokesman for the Calgary-based oil and gas pipeline, marketing and distribution company.
Enbridge announced April 1 it would file an application under Alaska’s Stranded Gas Development Act to negotiate with the state for a long-term fiscal contract in lieu of state and municipal taxes on the gas line project. Rennie said the company would file the application within a week.
The company is the second Canadian pipeline operator in the past month to raise its hand and say it wants in on an Alaska gas line. TransCanada Corp. met with the governor and state legislative leaders four weeks ago, pitching its proposal that the state join the effort to get a pipeline built by taking the price risk at the wellhead. Company doesn’t rule out working with TransCanada Enbridge isn’t necessarily ruling out an Alaska gas line partnership that could involve both pipeline companies. The company competes against TransCanada in some areas but also has partnered with the company in at least one project, Rennie said.
Although TransCanada has not filed a Stranded Gas Application with the state, it is talking with state officials and has said it is looking to take a lead role in the project. A potential pipeline developer is not required to immediately apply under the Stranded Gas Act and could decide to apply at a later date or simply build the line under existing state and municipal tax laws.
In addition to Enbridge, the state has applications from a consortium of the three major North Slope producers and the Alaska Gasline Port Authority, comprised of the Fairbanks North Star Borough and city of Valdez, which wants to build a municipally owned project with 100 percent borrowed money.
Enbridge has been following Alaska gas line developments for several years, Rennie said, watching as growing North American market demand, lack of easily accessible new supplies and rising prices combined to improve the economic hopes of the Alaska project. Enbridge says state, producers encouraged company “We started to get enough encouragement that we felt the time was right,” with that encouragement coming from the governor and North Slope producers, he said.
“In the months ahead, Enbridge will work in collaboration with producers, (and) the state … as we explore options for delivering Alaska gas in the most economic and effective way to North American consumers,” said Patrick Daniel, chief executive officer at Enbridge.
“I am pleased to see that they are willing to consider participating as a partner in a consortium that would include Alaska Native corporations and other Alaska-based companies,” said Gov. Frank Murkowski.
There is no question the markets need arctic gas from Canada and Alaska, Rennie said. But such a large new supply as Alaska’s North Slope could affect market prices, he added. “That’s a lot of gas coming down,” and the company has in the past talked about a phased-in approach to bringing Alaska gas into the market to help reduce any downward effect on prices.
Despite the renewed interest in building a multibillion-dollar line from the North Slope to Alberta, where the gas would move into the North American distribution system, questions still remain, Rennie said. The list includes construction costs, market prices and the regulatory process, he said. “We look at it and see the big risks that everybody else does. … None of them are insurmountable.”
Enbridge, with C$13 billion in assets at the end of 2002, owns and operates pipelines carrying more than 2 million barrels per day of crude oil and other liquids. It also holds a 50 percent interest in the Alliance gas pipeline, which runs nonstop from Alberta to Chicago and can move 1.3 bcf per day, and a 60 percent interest in the Vector pipeline that carries natural gas from the Chicago area through Indiana and Michigan and into eastern Canada.
In total, the company owns and operates more than 9,000 miles of natural gas gathering and transmission pipelines in the Midcontinent and U.S. Gulf Coast areas.
Enbridge, which started in 1949 as Interprovincial Pipe Line to move Alberta oil eastward to refineries, also owns the 540-mile pipeline for moving oil from Norman Wells, Northwest Territories, to Alberta.
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