Posted on 09/22/2006 9:10:08 AM PDT by thackney
With an Alaska natural gas pipeline on hold for what could be an extended period, importers of foreign liquefied natural gas (LNG) are rapidly expanding their capabilities of bringing gas to U.S. consumers from overseas, a senior official with the Federal Energy Regulatory Commission told an energy symposium in Anchorage last week.
Mark Robinson, director of FERC's energy projects office, said the United States is now importing 5.8 billion cubic feet a day of LNG through expansions of existing regasification facilities located mostly on the U.S. Gulf Coast. An additional 22.8 billion cubic feet a day of additional import capacity will be available with projects recently approved by FERC. These include 11 new sites and two expansions of additional plants, Robinson said. Five of those facilities are under construction now, he told the American Conference Institute's annual Alaska oil and gas symposium, held in Anchorage Sept. 18 and 19.
In addition, applications are pending for 10 proposed new sites and three proposed expansions that would regasify an additional 16.1 billion cubic feet per day, he said.
There are huge deposits of natural gas overseas that can be economically marketed in the United States once regasification plants are built, and these plants could undercut Alaska gas in the market if the Alaska pipeline is delayed, said James Slutz, the U.S. Department of Energy's deputy assistant secretary for oil and gas told the conference.
"We had hoped to see progress being made on the Alaska pipeline," Slutz said.
Robinson said FERC is ready to process an application for an Alaska pipeline, "but we have to have an applicant." He also said it will take FERC an equal amount of time to process an application for an Alaska LNG project and a pipeline, about 10 years.
Joe Marushack, ConocoPhillips' vice president for North Slope gas, told the conference, "we're prepared to move forward, to sign the contract, and we're even prepared to make changes (in the contract). ConocoPhillips is ready to move forward on this project. We have to see if the state of Alaska is ready," Marushack said.
The project is bogged down following the Legislature's failure to approve a proposed contract this summer on fiscal terms and state participation, and with Gov. Frank Murkowski's defeat in the Aug. 22 state primary election.
Murkowski will hand off the draft contract to the new governor after the November general election, but if either of the major party candidates is elected there will be a substantial delay, possibly for several years. Both of the major candidates, Republican Sarah Palin and Democrat Tony Knowles, say they want major changes in the contract. Only independent candidate Andrew Halcro has endorsed the present contract.
Rep. Ralph Samuels, an Anchorage Republican legislator who was deeply involved in gas pipeline issues this summer, told the conference that the cost of delay is huge for both the producers and the state. Delay adds to the project cost because of continuing price increases for materials and labor. Steel prices are up 150 percent since 2001, when the three producers developed a $20 billion cost estimate, and steel typically makes up about 20 percent of the overall cost of the pipeline.
The costs of importing LNG, however, will be declining. Robinson, of FERC, told the conference that the International Energy Agency estimates LNG import costs will decline 20 percent by 2010 because of larger ships brought online and new, more efficient gasification technology.
Add to that the latest dip in natural gas prices. Samuels said Henry Hub prices for natural gas closed at $4.83 per thousand cubic feet (mcf) Sept. 19. That's about one-third of what prices were a year ago, in the wake of Hurricane Katrina, Samuels said. It's a level that makes the Alaska pipeline economics very thin even if construction cost increases are kept to a minimum. "Alaskans need to understand how volatile the gas market is," and how that will affect the pipeline project, he said.
"The question we face now is whether the new governor will use the existing contract and the work we have done as a template, or whether he or she will totally reject the notion of a producer-owned pipeline and the state taking its gas in-kind, which means we essentially throw away what has been done to date," Samuels said.
"We are falling behind" ping
Palin is LNG, Tony is My Way is the Highway. Either way it all looks iffy right now.
LNG is 1.6 BCFD
The Highway is 4.5 BCFD
Pretty clear choice to me.
The Gas Pipeline peole want $3.50 to $7.00 to go ahead. Actual breakeven is $2.50, but they wouldn't do the project for breakeven.
LNG is also Port Authority ownership. Gov't, that is. The Prop 2 item is to tax the gas in the ground at a very low rate to encourage gas production or get out. Anti-Prop 2 is that tax would delay or kill the pipeline. I don't know but the tax seems like a reasonable thing to do and it is a small tax so it won't matter except to encourage the lease owners to get moving.
And the average price of Natural Gas Futures are about $7.50.
NATURAL GAS Daily Futures
http://www2.barchart.com/dfutpage.asp?sym=NG&code=BSTK
The pipeline planners don't look at price spikes but long term trends. It's a range. Right now the trend is $3.50-$7.00 which is adequate to make the pipeline worth while. Seems like they could build the highway route and add LNG sometime if they want.
That is exactly what BP and ConocoPhillips keep saying. But that doesn't make the newspapers for some reason. The takeoff points in the state are part of the contract. If anyone wants to commit to buy the gas at that point, pipe it to Valdez and build an LNG plant, nothing prevents them. In fact, the open season portion of the Federal Regulated pipeline requires the operators to give this opportunity. And the LNG risk become lower because much less infrastructure (cost) is necessary for their portion of the project.
Seems like a lot to give up just to dump an unpopular Gov. The political competition is intense even to the point of destroying the economy of the state.
That is how I see it. I will vote for the commie if I believe that is the best chance of getting the best Natural Gas Pipeline. But to be honest, I'm planning to move where the work is going to be, out of state.
That is only the front month price. Look at prices for the future, none of the projects will deliver natual gas in fall 2006.
There is a gas find in Colorado as big as Prudhoe Bay. They could develop that easily and probably will. Prudhoe isn't so attractive as some think it is.
Annual Energy Outlook 2006 with Projections to 2030, Oil and Natural Gas
Gas pipeline gets initial OK {Colorado}
http://www.freerepublic.com/focus/f-news/1706393/posts
Hope you folks in Alaska get the pipeline soon....it's the perfect energy sopurce for heat and cooking. Besides, I imagine there's a lot of gas in Canada that hasn't been found yet other than with the French liberals.
The pipeline, either proposal, goes through Canada to Chicago. It can pick up whatever Canadian gas along the way.
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