If constructed, a new Alaska gas pipeline would be the largest and most expensive private infrastructure project ever completed in North America. At a cost of up to $40 billion and stretching almost 2,000 miles, the line would stretch from the Arctic Ocean to Alberta and dramatically ease the transfer of natural gas to households in the U.S. and Canada.
If that sounds like a big deal, it is — but what makes it even more surprising is that two separate consortia of oil companies are promoting their own versions of the project, and each suggests they’ll move forward independently. That means a potential $80 billion investment in new pipes in Alaska, the Yukon, and Alberta, ready by 2020.[SButtonZ button="digg"]
There’s a lot of money to be had in the discovery and distribution of natural gas. And the rewards could be substantial: potentially decreased costs for North American consumers and a reduced reliance on foreign supply.
Both competing projects would lay an elevated pipe from Alaska’s Prudhoe Bay, where there is a large reserve of natural gas, to Alberta, where connections with the North American pipe network are possible. One of the projects leaves open the possibility of extending the pipe from Alberta to Chicago, adding 1,500 miles — but that’s a long-off possibility. Though Alaska has a large amount of gas buried under its most northern shores, it has been ignored because of the relative difficulty of moving the gas to consumers.
The pipeline, with a four-feet diameter from end to end, is such an enormous project that three millions tons of steel would be required to build it. The project would deliver about 4.5 billion cubic feet of gas to North American consumers every day.
Russian company Gazprom began construction this week on the $11 billion Nord Stream project, which will transport natural gas under the Baltic Sea from Russia to Germany.
In Alaska, if the two private consortia — one composed of TransCanada and ExxonMobil and the other of BP and ConocoPhillips (called Denali) — get their way, they’ll be able to transport gas easily and cheaply from the Arctic Ocean to the market. Currently, the United States imports 4.5 trillion cubic feet of natural gas every year, about one fifth of total consumption. The North Slope is estimated to have reserves of 35 trillion cubic feet of the natural resource.
There are no existing methods by which to move natural gas from the North Shore — it’s too isolated and too cold for tankers to make the trip directly there. The Trans-Alaska Pipeline System, which runs north-south 800 miles through the state from Prudhoe Bay to Valdez, was completed in 1977 and is running under capacity — but it’s used only for gasoline. In order for natural gas to be transferred, a new pipe must be constructed.
Over the next few months, both consortia will be taking advantage of Alaska’s “open season,” which allows them to ask minor producers to agree to send gas through the proposed pipeline. The State of Alaska will have to agree to any plans before construction begins, as will the Federal Energy Regulatory Commission.
The big question, though, is whether there is enough supply and demand to justify the cost of one — let alone two — new Alaska pipelines. Not only is there a limited reserve of natural gas on the North Slope — it’s unclear whether the resource would prove productive for more than a decade — but it’s also competing with cheaper shale gas that is being exploited by Canadian corporations. That resource, however, has run into a number of problems because of its potentially devastating ecological consequences.
One potential alternative for the Alaska pipeline, if the price of the full-scale line proves too high, is to build only from Prudhoe Bay to Valdez, following the route of the existing Trans-Alaska Pipeline. This would save billions of dollars, cutting the cost to $20-26 billion. On the other hand, it would require the use of ships to pick up and deliver gas elsewhere, increasing operations costs substantially.
We should learn what will be built by the end of this year.
Image: the Denali Pipeline Project map, from Denali
Minor point – the current pipeline flows oil that is heated for viscosity reasons. It is then transported to refineries in places like Cherry Point, WA, Anacortes, WA and Richmond, CA to become gasoline. Keep up the good work.
Neither will be built. Not for several decades.
Both may be promoted up to the stage of holding an “open season” to see who will commit themselves and they will each see there is insufficient demand now for these pipelines. This is all because the cost of the pipeline and the cost of filling either with gas exceeds the price they can get when they sell it, a price that at least for the next few decades will stay low because of unexpectedly low cost shale gas.
The pipeline companies know this, the natural gas companies know this, and informed industry analysts know this. It seems only the state of Alaska does not know this as such a large share of the tax revenues that they expect are at stake. It will take them awhile to accept that the citizens of Alaska will someday soon have to pay taxes as we do in the other 49 states.
I’m also wondering whether this idea, as well as the slew of LNG terminals going up, are viable with the expansion of shale gas. Note that I think the LNG terminals can run both ways, in that you can use them to exposrt gas as well as import it. Perhaps some of the Alaska gas can be exported as well? The construction of that pipeline would mean employment for tens of thousands.
LNG terminals tend to have both compression and decompression equipment. With the rise in the last five years of North American NG production, the business proposition of many of the LNG terminals is suddenly reversed. While Qatar can still supply LNG at the lowest price of anyone out there, US LNG from the West Coast to Asia can be competitive because of the shorter transit.
Interesting. What’s the comparison here to say, investing 80 billion in offshore wind in the potential wind markets off of the North Atlantic (I’d also be interested in seeing a comparison in Oil vs. Wind in that area)