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BP counsels patience in expecting an Alaska natural gas pipeline

Posted: Sunday, January 28, 2001

ANCHORAGE -- High natural gas prices that have supercharged enthusiasm for a pipeline to export North Slope gas also create a potential barrier, a top BP executive said Friday.

Richard Olver, head of exploration and production for London-based BP, told a gathering of Alaska oil industry professionals that they should be realistic in their hopes for a natural gas pipeline.

Natural gas is now selling for about $7.29 per thousand cubic feet. Through the 1990s, it averaged $2.06, Olver said. If the price stays at $4 or more for an extended time, BP expects available gas reserves to swell to five times their current size as producers with fields in Canada, the Lower 48 and elsewhere step up production and explore for new sources, he said.

''That's not what Alaska needs because if that happens, Alaska gas would never be produced,'' Olver said following a speech at the annual meeting of The Alliance, a trade group of Alaska oil-service companies.

BP officials do not believe the natural gas price will hold at $4, he said.

Olver said it's not today's high price that matters. Rather, it's whether Alaska gas can be competitive with other supplies 20 or 30 years from now, he said.

''Together, I think we need to be realistic with each other,'' Olver said. ''We need to be inclusive and above all we need to be competitive.''

Olver emphasized that BP and other major oil companies are committed to building a gas pipeline by 2007. He noted that BP, Exxon Mobil and Phillips Petroleum have put 75 of their ''best people'' in an Anchorage office to study the pipeline project and the various routes the line could take. The companies will spend $75 million on the review.

''We don't do that kind of thing if we think there's no chance'' for the pipeline, he said.

But Olver sounded other cautionary notes.

The original estimate of the 800-mile trans-Alaska oil pipeline was $900 million. It ended up costing 10 times that, Olver said. The gas pipeline would be much longer and would need to be thick-walled compared to the oil pipe because the gas must be pressurized.

Just tying the line into the existing natural gas network in Alberta probably won't be enough. Because pipelines beyond that point wouldn't have enough capacity to carry the Alaska gas and maybe lots of gas coming from other places, most likely piping would be needed clear to Chicago, a key gas hub some 3,500 miles distant, Olver said.

Getting permits to build a pipe from Alaska through Canada, if that's the direction the line goes, probably would take ''extraordinary'' assistance from both the U.S. and Canadian governments, he said.

Olver said pipeline advocates should be patient while routing options and all other factors are studied.



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