Alaska’s Shut-in Gas Dilemma
January 13, 2012
Alaska has a huge reserves of natural gas which the State is yearning to develop and get to market.
Factors to consider:
- Alaska has estimated reserves of 303 Tcf (mainly shut-in in the North Slope). This compares to total US production of about 23 Tcf per annum.
- The advent of shale gas deposits in the lower 48 has brought on line huge natural gas reserves. See the graphic on projected production.
- The shale gas developments make it doubtful that the Alaska Highway Gas pipeline would be built. A gas market oscillating between $3 and $6/MMBTU is unlikely to justify a $40 billion gas line.
- On 5-Jan-12 the Alaska Governor Sean Parnell met with the CEOs of Exxon-Mobil and Conoco-Phillips. “We had a productive discussion about how to get alignment between the companies and grow Alaska’s economy through oil and gas development,” Governor Parnell said. “I made it clear that we want to see progress on commercializing Alaska’s gas for Alaskans and markets beyond.”
- This summer the world’s only Ice-1A winterized class LNG tanker will transport the first liquefied natural gas from northern Norway to Japan via the Northern Sea Route.
- Conoco-Phillips and Marathon Oil Corp. plan on mothballing the small LNG facility on the Cook Inlet, due to deteriorating market conditions.
Commentary
A pipeline to the lower 48 is not going to happen. Shale gas discoveries have changed the project economics in a negative way.
To build a pipeline from the North Slope to either Anchorage or Valdez would require investment of $6-12 B. The economics are not compelling for any one company, but there may be a business case for the three majors working together.
The option of shipping LNG from Point Thompson, on the North Slope, will undoubtedly get looked at.
Sources
- a) http://www.naturalgas.org/overview/resources.asp
- b)http://gov.alaska.gov/parnell/priorities/alaska-gasline-project.html
- c)http://www.youtube.com/watch?v=MYtESpBGtXw
- d)http://www.petroleumnews.com/pntruncate/314919103.shtml
