An Alaska natural gas pipeline is needed now, and if interested parties cooperate, the challenges are not insurmountable, Drue Pearce, federal coordinator for Alaska natural gas transportation projects, told resource developers in Anchorage March 19.
While the technical and economic challenges are intriguing, the bigger challenge is the politics at play, Pearce told the Resource Development Council for Alaska in prepared remarks.
While both Denali Alaska Gas Pipeline and TransCanada Alaska bring unique strengths to their individually proposed projects, only one pipeline will be built.
"So the key question remains, will the two competitors merge, and when?" she said. "The competition will become inefficient and costly at some point in the near future. Federal agencies are prepared to deal with both projects for as long as necessary, but it is not an ideal situation and it certainly isn't efficient."
Another piece of the puzzle is how the federal governments of the United States and Canada and the state of Alaska, as well as the provincial and territorial governments, will ensure that it happens, she said.
Pearce noted that there has been a lot of talk lately about the economics of a natural gas pipeline project, specifically whether there is still a market for Alaska natural gas.
She said she was pleased when Jim Mulva, president and chief executive officer of ConocoPhillips, discounted low prices as a roadblock to the pipeline project's development. Mulva, she said, noted that prices are in flux and there are many factors that can change them every day -- some natural, others manmade.
"When discussing the supply of natural gas for consumption in the United States today, the general focal point includes pipeline imports from Canada, imports from overseas in the form of liquefied natural gas, and domestic production of non-conventional (supplemental sources of supply) natural gas," she said. "Based on recent historical analysis and future projects, the Alaska natural gas pipeline would be completed in 2018 and the economics continue to be favorable."
Once the pipeline is in service, Alaska's total natural gas production would be 2.0 trillion cubic feet in 2021 and remain at that level through 2030, she said.
Declining production in Canada is expected to reduce the availability of natural gas supplies for export to the U.S., she said.
"Canada is already experiencing a decline in conventional production from the Western Canadian Sedimentary Basin. Decreased availability of natural gas from the U.S. remains true even if Canada's Mackenzie gasline is constructed," Pearce said. "The Mackenzie Delta has less than 1 trillion cubic feet of proven reserves. It's expected to be easily absorbed in the North American integrated markets without displacing Alaska gas."
Pearce noted that in 2008, the U.S. imported less than half the liquid natural gas that it imported in 2007. Europe and Pacific Rim countries, including Japan, outbid the U.S. and there was an increase in domestic shale production. It is also worth noting that Europe is likely to expand its LNG import capabilities as a result of the recent Russo-Ukrainian dispute, during which European countries experienced a supply disruption, she said.
The other potential source of natural gas is unconventional domestic production.
"Shale formations have emerged as a leading source of supply," Pearce said.
Increased domestic natural gas production can be directly related to advances in technology that have allowed more production of shale gas, she said.
Still, there are many hurdles to overcome in order to effectively produce shale gas, including environmental concerns related to noise, heavy truck traffic, air pollution and the chemical solutions utilized, she said.
Copyright (c) 2009, Alaska Journal of Commerce, Anchorage. Distributed by McClatchy-Tribune Information Services.