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Alaska gas development not a sure thing
Kristen Nelson PNA Editor-in-Chief
Building a pipeline to ship North Slope natural gas to the Lower 48 is not a done deal.
Dick Olver, group managing director of BP and chief executive officer of BP Exploration, told The Alaska Support Industry Alliance “Meet Alaska” conference Jan. 26 that getting Alaska North Slope gas to market will be a big, expensive project. And any project to take that gas to the Lower 48 will have to be competitive with other sources of gas. And that, he said, depends a lot of the price of natural gas in the Lower 48.
At today’s high gas prices in the Lower 48, the general reaction is “no problem, let’s get on with it let’s just do it!
“But of course the gas price today is irrelevant,” Olver said.
“The gas price tomorrow is irrelevant. The gas price the day after tomorrow is irrelevant. The gas price in 2002, ‘03, -04, ‘05 and ‘06 are also irrelevant.
“The only thing that matters is how to be competitive between 2007 and 2037.” Even coal a competitor Alaska North Slope gas has to be competitive with other North American gas supplies and with coal, Olver said.
“The U.S. could actually burn an enormous amount of coal. They could even do that in an environmentally clean way,” Olver said.
The North American gas market, he said, has been operating at $2 gas, and at $2 gas there are 16 billion standard cubic feet a day being produced from 200 trillion cubic feet of reserves.
BP, Olver said, is the largest producer of gas in North America:
“We know just a little bit about it.”
If there are 200 trillion cubic feet of reserves at $2, BP thinks that at a sustained price of $4 there would be five times as much.
“Not 200 trillion cubic feet, but 1,000 trillion cubic feet. From tight gas, from the application of technology and more exploration.”
And a lot of that 1,000 trillion cubic feet “could come at $3 or less,” he said. High gas prices bad for Alaska Olver related a conversation he had with Gov. Tony Knowles in London:
“I said to the governor ‘you know, the worst thing that could happen for Alaska would be for there to be a high gas price.’ And he looked at me as if I was totally mad. But you know, if there was a long-term high gas price, there would be other sources that could get ahead. So that’s why we need to be competitive.”
In addition to competition from presently uneconomic North American gas, Olver said foreign gas could be competitive. He noted that BP is currently sending gas to Boston from Trinidad at less than $3.
BP and its partners ExxonMobil and Phillips will pursue gas commercialization “diligently and relentlessly,” he said, but because of potential competition and because of the cost of a project to take Alaska North Slope gas to market, “we need to be realistic.
“We need to be open and honest with each other.
“This project is extremely large,” Olver said. “It’s not something that one does without thinking about all the alternatives.”
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