Gas pipeline, LNG projects not feasible, consultant says
By Tony Hopfinger

Anchorage Daily News
21 December, 2001

STUDY: North Slope's untapped resource may stay that way awhile.

An energy consulting firm believes that developing the North Slope's natural gas fields -- the largest untapped gas reservoirs in North America is not feasible for at least 13 years.

North America is burping with smaller gas supplies that should keep the lights on throughout this decade, said Ed Kelly, North American gas researcher for the prestigious Cambridge Energy Research Associates.

"There are many competing sources in North America," he told state officials this week in downtown Anchorage.

If Kelly's predictions are accurate, they're bad news for people hoping another Alaska economic boom tied to a multibillion-dollar construction project.

Three gas producers are soon expected to complete their in-depth analysis of building a gas pipeline from Prudhoe Bay to the Midwest. Finding a market for the North Slope's estimated 37 trillion cubic feet of natural gas has been a dream of Alaska officials and civic leaders for a quarter-century.

A Lower 48 project is estimated to cost $15 billion to $20 billion. That huge price killed the idea until last winter, when Lower 48 natural gas prices piked. Prices have since settled back to about $2.50 per 1,000 cubic feet, only slightly above their levels before last year's spike.

While Kelly briefly mentioned the proposed project to the Lower 48, the Cambridge study focuses on liquefied natural gas, which is natural gas chilled into a condensed liquid for shipment across oceans. For nearly 20 years the state also has looked at building a pipeline to Valdez to export LNG to Japan and elsewhere.

The state was among several dozen clients that signed on for the Cambridge Energy study of world LNG markets this year, paying $27,500, said Larry Persily, state deputy commissioner of revenue. The study concludes a multibillion-dollar Alaska LNG project doesn't make financial sense.

The study comes after the Knowles administration faced criticism for not seriously considering an Alaska LNG project. The governor wants gas producers to build a line from the North Slope, through the state and along the Alaska Highway to the Lower 48.

But LNG supporters, like Scott Heyworth of Anchorage, believe their project would cost less and provide more jobs and more state revenue.

The LNG industry is small compared with other energy industries, though in the last 36 years, 128 tankers have been brought on line. Cambridge predicts that number will grow to about 160 over the next two years.

Alaska has been part of the LNG industry since 1969, when Phillips Inc. began exporting liquid gas from Nikiski.

Kelly said the proposed $8 billion to $10 billion Alaska liquefied gas project is too expensive. Shipping LNG from Alaska to Asia would cost $2.75 to $3.50 per 1,000 cubic feet, not including other costs, such as state fees, extraction and the value of the gas, he said.

"There is some tough competition out there that can do it cheaper," he said.

Competitors include Australia, Indonesia and other gas producers closer to the Pacific Rim, he said.

Heyworth is pushing for a statewide vote next year on creating a government body that could finance, build and run a huge natural gas development project. He did not view Kelly's forecast as all bad news. He said the report shows small markets exist for Alaska LNG, such as pockets in Asia, the West Coast and Mexico.

Source: orignal document

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