Alaska Gas Pipeline

In a carefully choreographed announcement, ConocoPhillips and BP announced yesterday morning that they are forming a new pipeline company, Denali Pipeline, to build a natural gas pipeline from Alaska’s North Slope to Alberta. This effectively derails Governor Palin’s AGIA process and TransCanada’s proposal. If you need a quick rundown on the announcement, the Anchorage Daily News blog has a good summary of the news reports (link).

Various folks have weighed in on what this announcement means. Over at Latitude 61, there is an opinion that the gas line is the last big project by the majors. I would disagree. Recent sales in the Chukchi Sea (MMS Lease Sale 193), along with Canadian ventures in the Beaufort, would indicate that, while the heyday of Alaska oil is over, the province is far from dead.

The Alaska Gas Pipeline blog, in my opinion, has correctly intuited what this announcement means, although he wrote that post on March 30th. I’ve held the view for several years that the only reason to run a pipeline that size is to feed tar sands production. Note that the announcement is only for a pipeline to Alberta. The lower 48 will not get any of this gas, and Alaska will only tap off a small amount. This is a pipeline to support the Alberta tar sands. That’s been ConocoPhillips preference all along. The producers plan under the Murkowski administration also dead ended in Alberta. Any talk of lower 48 gas supplies is simply political lip-service.

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2 Responses to Alaska Gas Pipeline

  1. Mike says:

    I believe you’ve misinterpreted my posting at Latitude 61. Otherwise, I wasn’t clear. In either case, let me point out a few things.

    Alaska’s oil production – which does not include the outer continental shelf – has peaked. By definition, there are no more big oil projects. While there is talk of drilling in Bristol Bay, I think oil is on its way out. With respect to oil – which is not what my post is about – the last big project was likely TAPS.

    You reference the lease sales in the Chukchi Sea, but those are not in Alaska’s jurisdiction. Do you think they’re going to put the oil in tankers, move it to the North Slope, put it in TAPS, and put it in another tanker in Valdez? That’s not what’s going to happen. The impact of the OCS activity is going to be minimal in the state. They’ll build their platforms, load up their tankers, and take it to market. Don’t count on any more money coming to the state than is absolutely needed.

    Which brings us to gas. Gas is less valuable than crude. Once we start pumping gas out of the ground and putting it to use, we’re reducing pressures in the ground and therefore further reducing crude production. You don’t do that until you’re getting close to giving up on oil production. Ignoring all the other factors, this fact along tells us that oil is going downhill. One need only look at the

    I never said that this is the last big gas project. In terms of the sheer magnitude of costs, it’s probably going to be one of, if not the, biggest. That’s simply due to the fact that it includes a tremendous expense to build a gas line and related infrastructure to Alberta. In terms of the amount of gas produced, though, I’m not going to make any calls. This is the first gas project of any real size; it’s not necessarily going to be the largest find.

    Let me now respond to your comment about the Alaska Gas Pipeline blog have the correct interpretation of the purpose of this gas. Perhaps it wasn’t clear, but in my post I specifically bemoan the fact that the gas is going to Alberta to melt the tar sands and get the last few drops of synthetic crude from there. The point of my post was not to go into great detail on this, but I thought it needed to at least be mentioned. I agree wholeheartedly with the Alaska Gas Pipeline blog that the true purpose of the gas line is to develop Alberta’s oil.

  2. ilona@israel says:

    Informative post that describes about Alaska Gas Pipeline. The Alaskan Natural Gas Pipeline is a proposal to transport natural gas from the Alaska North Slope natural gas reserves to the U.S. Midwest.

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