Consortium moves on to second stage of planning

Posted: Tuesday, August 08, 2000

ANCHORAGE (AP) -- A consortium working on a pipeline to ship natural gas from the North Slope to either Valdez or Nikiski is moving into the second stage of work on the project, now expected to cost around $7 billion.

''Stage 2 will be focusing on the project's competitiveness,'' said Steve Alleman, project manager for the consortium and a 28-year employee of Phillips Petroleum Co. It will cost about $3 million and take a year or so.

In the first stage, sponsors scaled down the project's output to 7 million tons a year of liquefied natural gas from 15 million, cutting the cost roughly in half. But they came to no final decision on whether the line should run to Valdez or Nikiski.

''We reduced our capital risk by scaling down,'' Alleman said. ''But we didn't just cut it in half -- we re-engineered the whole design.''

The reduction puts the project more in line with other LNG projects around the world, Alleman said. It would produce roughly six times as much liquid as the current Phillips plant in Nikiski.

If demand increases, more gas could be moved through the smaller line by using higher pressure, he said, and the liquefaction plant could be expanded.

The sponsor group includes BP Exploration (Alaska) Inc., Foothills Pipe Line Ltd., and Marubeni Corp., as well as Phillips. The companies spent $12 million to $15 million on the first stage, doing most of the engineering and some of the commercial work, according to Alleman.

Now they'll look at what savings they can expect from working with other projects for producing liquids from the gas, or a pipeline taking gas through Canada to the Lower 48. ''And we'll look at working with a public entity like a port authority or government-type structure,'' Alleman said.

''We think the fact that we've completed the stage 1 work is a milestone,'' said Ronnie Chappell, a spokesman for BP in Alaska. ''And the fact that we've moved on to stage 2 shows we're serious about this option.''

But there are still no customers signed up for the product that would come out of the project.

''The market is not there yet,'' Alleman said. ''But we believe it will be there over time. And we want to be ready when it is.''

That could be as early as 2007, he said, but more realistically 2008 to 2010. Actual pipeline construction would take three or four years.

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