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Gasline to Lower 48 BP Amoco preference Sir John Browne tells 16th World Petroleum Congress company prefers a gas pipeline over liquified natural gas, would consider ownership of line if economics right Gary Park PNA Canadian Correspondent
BP Amoco hopes to tap U.S. and Canadian Arctic natural gas reserves within a decade and is ready to consider taking ownership of any pipeline from the north, says chief executive officer Sir John Browne.
“If we find the right returns on a pipeline and are permitted to own it, we’d certainly consider doing that,” he said while in Calgary for the 16th World Petroleum Congress.
“We have taken big interests in pipelines, not the least of which is the trans-Alaska pipeline system where we own 50 percent. It all depends on returns.”
He also indicated a strong preference for shipping North Slope gas south through Canada to the Lower 48 rather than as LNG to Asia, noting that the LNG technology is still “very expensive.”
“Within the decade, it looks as if the market will be there to deliver gas from the (Arctic),” said Browne, adding BP Amoco is in consultation with other producers and pipeline companies.
For him, the issue is not engineering, it’s cost. “At what gas price do we think it’s the right risk level to take.”
Energy analyst John Mawdsley of First Energy Capital in Calgary said BP Amoco’s participation in Arctic gas development sends a strong message to the industry about the future of northern development.
Alaska gas could beat Canada’s Arctic gas to market Meanwhile, TransCanada PipeLines says Alaska’s stranded North Slope gas could beat Canada’s Arctic reserves to market, increasing the chances of two northern pipelines.
Should North American demand keep growing at its current pace, there could be a “very strong push to get the reserves from Prudhoe Bay very quickly,” said Walentin Mirosh, TransCanada’s senior vice president of corporate strategy and business development.
If the issue then becomes “what route will get you to the marketplace in the fastest time,” the nod would likely go to Foothills Pipe Lines — a 50-50 partnership of TransCanada and Westcoast Energy — which has U.S. and Canadian regulatory approvals from 1977 for the Alaska Natural Gas Transmission System.
But that wouldn’t necessarily rule out the second option — a pipeline from the Mackenzie Delta and Beaufort Sea down the Mackenzie River Valley. “There may well be two pipelines and they could be built in different time frames,” said Mirosh.
Unlike the Delta in the Northwest Territories, where Canadian producers are studying the feasibility of moving gas south, the North Slope has at least 30 trillion cubic feet of gas that could be produced as soon as a pipeline is built, of which 8 billion cubic feet per day is being reinjected to keep the pools pressurized, he said.
Exploiting the North Slope gas via ANGTS could be tempting for producers and the market because Foothills has received most of the approvals it needs, although the terrain across Alaska and the Yukon is seen as formidable.
“When I look at it today, you cannot discount the value of having some predetermined and preapproved routing in place,” Mirosh said. But a separate Mackenzie route might still be viable, even though ANGTS includes provision for the Dempster Lateral from the Delta and Beaufort, joining the main line in the Yukon.
Pipelines exploring all options TransCanada and Westcoast — as Canada’s two largest gas pipelines — decided in May to form an alliance to explore all options in addition to their joint stake in ANGTS.
“We are working closely together as an example of how we think it’s going to be necessary to approach pipeline development (in the Arctic),” said TransCanada spokesman Glenn Herchak.
Westcoast spokesman Bob Foulkes said the alliance “is more than a handshake. We’re working together and this thing could evolve in a whole bunch of different directions.”
Both companies agree that the end result could be a new consortium if the Mackenzie route gains the edge.
Industry sources say the reinforced TransCanada-Westcoast partnership arose after major producers with reserves in the Northwest Territories — which include Imperial Oil, Gulf Canada, Shell Canada, Mobil Oil Canada, Petro-Canada, Alberta Energy Co. and Anderson Exploration — distributed a questionnaire asking what a Mackenzie Valley pipeline might entail.
Analysts believe TransCanada and Westcoast are wasting no time setting aside their long-time rivalry to get the jump on much larger, unidentified U.S. pipelines that are rumored to be eyeing the Arctic, but have yet to declare their intentions.
Arctic Resources, a Houston-based consortium of investment bankers proposing a U.S.$6 billion link from the North Slope under the Beaufort Sea and down the Mackenzie, supports the efforts by TransCanada and Westcoast to achieve a “one-window approach” on a pipeline, said Canadian spokesman Harvie Andre.
But he said Arctic Resources strongly backs the Mackenzie route because it is shorter, cheaper and faces fewer environmental obstacles than the ANGTS route.
Territorial tug-of-way in Canada On another front, a territorial tug-of-war between the Yukon and Northwest Territories is growing in intensity.
Pat Duncan, the Yukon’s newly elected premier, said she is taking a “very proactive” role in lobbying producers and pipelines to back the ANGTS project, arguing the environmental and socio-economic studies for that route are far more advanced than any for the Mackenzie.
To advance the ANGTS case, Duncan said her government is giving priority to settling seven outstanding aboriginal land claims along the pipeline corridor as well as negotiating the transfer of regulatory control to the Yukon from the Canadian government.
The Northwest Territories, under its new premier Stephen Kakfwi, is taking a similarly aggressive approach in trying to seize regulatory authority from the federal government by establishing a forum of federal, Northwest Territories and aboriginal representatives.
Jim Hope-Ross, managing director of the National Aboriginal Business Association, said there is optimism that a regulatory framework can be developed expeditiously, avoiding a repeat of the 12-year legal and political wrangling between the federal and Newfoundland governments over control of offshore oil and gas.
However, he also cautioned the gas producers and pipelines that Northwest Territories gas won’t be developed without aboriginal equity and management of a pipeline through business partnerships that are “long lasting and of mutual benefit.”
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