Knowles pushes Alaska natural gas ...

... While oil industry gets ready to bring it to market

Posted: Thursday, September 21, 2000

It is no longer a question of whether North Slope gas will be commercialized, BP executive vice president Dick Olver said Wednesday. It is a question of when and how.

"We believe 'when' will be no later than 2007, and there are three exciting options for bringing North Slope gas to market," he told Wednesday's meeting of the Alaska Support Industry Alliance in Anchorage, teleconferenced to the Alliance chapter in Fairbanks and a joint meeting of the Kenai chapter of the Alliance and the Kenai Chamber of Commerce.

One option is a pipeline to bring North Slope gas to Canada and the Lower 48 states, he said. Another is a plant to cool it to a liquid for shipment to Asia.

"A third (option), of course, is to convert that gas to synthetic crude and transport it down the Trans-Alaska Pipeline," he said.

BP is part of an industry group exploring the feasibility of building a pipeline to carry North Slope gas to a liquefied natural gas plant in Nikiski or Valdez, and it is building an $86-million plant in Nikiski to test technology for turning natural gas to synthetic crude.

With 35 trillion cubic feet of known North Slope reserves, the options are not mutually exclusive, he said.

The Kenai Peninsula Borough has been promoting construction of a pipeline and an LNG plant in Nikiski. Exports would be the main goal, but that pipeline also could supply homes, businesses and industry from Fairbanks to Anchorage and Kenai. In competition, Valdez, the Fairbanks North Star Borough and the North Slope Borough have formed a port authority to build a pipeline and an LNG plant in Valdez.

However, Olver said the Pacific Rim market could be difficult to crack.

"I think the Pacific Rim market will grow a lot slower than the available supply of gas," he said.

There are huge gas reserves in Siberia, Russia's Sakhalin Island, Indonesia and Australia. BP is doing everything it can to develop markets, he said, but the question is whether BP can deliver Alaska gas to the Pacific Rim at competitive prices.

"The answer is, it might be easier to go to Chicago," he said.

Olver said BP is aggressively planning a gas pipeline from Alaska to Alberta. From there, the Canadian system could carry Alaska gas to the Lower 48.

"This pipeline will provide capacity for up to 4 billion standard cubic feet a day with first gas currently planned between 2006 and 2007," he said. "It will cost about $10 billion, and it will operate for at least 30 years."

One possible route runs from Prudhoe Bay to Fairbanks, then down the Alaska Highway. Another runs through the Beaufort Sea to the Mackenzie Delta -- where Canadian gas reserves await development -- then south through Northwest Territory.

Kenai Peninsula Borough Assembly president Bill Popp said Olver's talk was encouraging.

"The commitment from BP to move forward on the out-of-state route is a very positive sign for Alaska as a whole," he said. "I think it also offers an opportunity to make the export line more viable, because there's the ability to cost-share. This could domino."

A gas line to Fairbanks could supply both the link to Alberta and a spur to Nikiski, he said.

"I believe there is a real strong commitment to have a gas line in some form to Southcentral Alaska," he said."We've already had comments from our congressional delegation -- all three individuals -- that they want to see access to the resource for Southcentral Alaska."

Olver said BP cannot and should not choose the route alone. A pipeline through Canada must serve Canada's interests, too.

"That's partly why my next port of call when I leave here is to Calgary to discuss the project with the Canadians," he said.

He said BP is working diligently to find a solution acceptable to Alaska.

"We recognize that Alaskans expect to benefit from development of their own natural resources, in terms of employment, in terms of the use of Alaskan businesses, in terms of access to those natural resources and in terms of revenue," he said.

BP also is committed to environmentally responsible development, he said.

A questioner noted that at least four groups are studying the feasibility of a pipeline to bring North Slope gas to the Lower 48 and asked whether Olver foresees any move to combine their efforts.

Olver said the solution is for the major producers to meet with governments of all of the nations involved.

"I should say the two countries, but there are two thinkers of one country, of course," he said. "There's the United States government and there's the Alaska government. Then there's Canada."

Olver said he expects an alliance of pipeline companies, producers and Native interests in Canada and Alaska. But that is not the most important issue, now, he said.

"The most important issue is to decide fundamentally what we will do and can we do it with a 30-year gas price and an estimate of costs. And the way to do that is to have a conversation I think between the government representatives and the producers," he said.

Kenai Mayor John Williams, who also sits on the borough LNG task force, said he sees BP moving toward a pipeline along the Alaska Highway route. The danger is that there could be no pipeline to Nikiski or the Railbelt, he said.

"Then, at some point, consumers would have to pay the cost of bringing that gas here," he said.

A spur to Cook Inlet would be costly, he said. Meanwhile, Williams suggested, Kenai residents should ponder how much longer existing industrial plants can survive on known Cook Inlet gas reserves.

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