Tuesday, June 2, 2009

New lower-48 natural gas production make arctic pipelines less attractive

ANCHORAGE – A 40-year plan to deliver natural gas from Arctic regions of the U.S. and Canada to the Lower 48 states is under threat from large shale-gas discoveries elsewhere on the continent and slow-moving regulatory processes.
Over the past decade, partnerships involving ExxonMobil, Shell, BP and ConocoPhillips have spent hundreds of millions of dollars on plans to develop Alaska's North Slope and Canada's Mackenzie Delta.
Backers of the 4.5 billion cubic feet a day (cf/d), $30 billion Alaska project and the 1.8 billion cf/d, $13.7 billion Mackenzie Delta venture have tied their hopes to an unshakeable belief that gas prices will again rise well above $10 per 1,000 cf as conventional reserves disappear.
But hopes that these projects will come on stream in the 2010-20 period are fading, because regulators and governments have failed to keep pace with industry timetables for issuing approvals and permits. More importantly, shale-gas discoveries in Texas, Louisiana and Pennsylvania make piping gas from the Arctic look less profitable.
In Alaska, Gov. Sarah Palin’s administration bet $500 million on the Alaska Gasline Inducement Act (AGIA), providing an incentive for construction of a 4.5 billion cubic-foot-per-day natural gas pipeline from Alaska’s North Slope that may never be built.
New discoveries in the Barnett Shale of Texas coupled with new ways to extract gas a mile deep from the Marcellus Shale in Pennsylvania and the Haynesville Shale in Louisiana could supply the total needs of the U.S. for natural gas for the next 100 years, making a $30 billion line from Alaska increasingly unlikely to be profitable.

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