Post 1191: Open Season declared for direct pipeline from Alaska to US via Canada: 24/7wallst.com

[Hans Laetz, Newsgroup Editor]

Partners TransCanada Corp. and Exxon Mobil Corp. have announced the
beginning of a three-month open season for capacity on the proposed
Alaska (Gas) Pipeline. The pipeline, if and when it’s build, would
carry up to 4.5 billion cubic feet of natural gas daily from Prudhoe
Bay on Alaska’s North Slope to either a connection to TransCanada’s
existing pipeline system in Alberta or to Valdez, Alaska, where a new
LNG plant would be constructed to convert the gas to a liquid and then
put it on LNG tankers for distribution. Here’s a map of the proposed
Alaska Pipeline.

An open season is essentially a pre-bidding auction that pipeline
companies use to assess interest in a proposed pipeline. Companies
that plan to extract natural gas from the North Slope are being asked
to indicate how much pipeline capacity they would contract for if the
pipeline were built. A competitive proposal from a consortium
consisting of BP plc (NYSE:BP) and ConocoPhillips Corp. (NYSE:COP) has
already initiated an open season ending in October on a competing
pipeline, called the Denali Pipeline, that is proposed as an
alternative to the Alaska Pipeline. Only one pipeline is likely to be
built.

There is an estimated 8 trillion cubic feet of gas offshore of
Alaska’s North Slope that would be shipped on the winning pipeline
system. The Denali Pipeline is estimated to cost about $35 billion,
while the Alaska Pipeline estimate has come in at $32-$41 billion.
Both routes to Alberta are approximately 1,700 miles long and the both
would use 48-inch diameter pipe to deliver about 4.5 billion cubic
feet of gas/day. If the route to Valdez is chosen, the pipeline would
be about 800 miles long, but would include a costly LNG train at the
terminus in Valdez.

When the US natural gas market is flooded with gas from shale plays in
the lower 48 states, it seems frivolous to consider spending billions
of dollars for a pipeline that may not be filled for years. But BP,
Conoco, and Exxon own the leases to virtually all the North Slope gas,
and if they don’t develop them, the leases could be lost. None of the
companies wants that. Better to build the pipeline now and have it in
hand when the time comes that the shale gas plays are exhausted.

The state of Alaska, of course, wants a pipeline to be built as soon
as possible in order to tap the revenue the state will get as oil
production in Prudhoe Bay declines. Construction on the gas pipeline
is not likely to begin until about 2016, and TransCanada has estimated
that its pipeline would be ready to ship gas by 2020. The state
supports the TransCanada/Exxon pipeline because that proposal has
fallen in line better with the state’s demands.

It will take months after the open seasons close to sift through the
proposals from potential shippers, and to convert those promises to
firm contracts. Then, of course, will come the inevitable delays
caused by opponents of any more pipelines along Alaska’s North Slope.

What is also inevitable is that a pipeline will be built. There’s too
much gas there to just leave it stranded. And natural gas, which
produces about half the carbon emissions of coal, is far more likely
to have an impact on reducing emissions than any other fuel because
there is so much of it and we know how to extract and transport it and
use it for a transportation fuel.

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