February 2008 Update

In the news...

• Port Authority Presses All-Alaska Pipeline Route (2/13/2008) Officials from the Alaska Gasline Port Authority asked Alaskan legislatures to reconsider an option to build a natural gas pipeline through Alaska traveling from the North Slope to Valdez. The port authority's application to build the all-Alaska pipeline was considered incomplete and thus rejected by Gov. Sarah Palin's administration in January. Project manager Bill Walker said the port authority's plan was initially rejected because it was not able to get project cost and other data from industry partners pressured to withdraw from the bid. He urged lawmakers to do a "full and robust" independent analysis of the all-Alaska project before deciding to accept the proposal by pipeline company TransCanada - the only proposal determined to be complete under the Alaska Gasline Inducement Act process. Walker told Senate Resources Committee Members the 806-mile pipeline from Prudhoe Bay to Valdez could be built faster, face fewer hurdles and benefit the state because gas liquefied for transport on tankers could be sold to multiple markets. [More here]

• Paline and Gas Line Team Meet with ConocoPhillips (2/12/2008) Alaska Gov. Sarah Palin met with ConocoPhillips' executives to discuss a proposed pipeline for transporting natural gas from the North Slope. Gov. Palin rejected a proposal from ConocoPhillips in January that was outside the Alaska Gasline Inducement Act guidelines. She said the almost four-hour meeting was to review concerns the company had with AGIA and not to negotiate any tax rates and length of terms the company sought with their gas pipeline proposal. "It's to fulfill our commitment to not dismiss anybody's ideas and proposals on how to monetize Alaska's gas resources," Palin said. Although TransCanada's proposal was the only one to comply with AGIA, ConocoPhillips has launched a publicity campaign to keep its position at the forefront. [More here]

• Canada, Brazil Lead Oil Output Growth in Americas (2/8/2008) Investment in Canada's oil sands and increasing Brazilian crude production should more than offset declines elsewhere in the Americas -- including Mexico and Venezuela, a Reuters survey showed. The gains from Alberta's vast tar-like oil deposits should increase oil production 7 percent to around 3 million barrels a day, while discoveries off Brazil's coast could help increase production by 13 percent to 2.32 million barrels per day. "What we have been seeing is relatively flat or falling supplies from Mexico and Venezuela," said Greg Stringham, vice-president of the Canadian Association of Petroleum Producers. Output from OPEC member Venezuela could dip slightly to 2.43 million barrels and, in Mexico, production may fall by 180,000 barrels a day to 3.32 million, the survey said. Those declines are large factors behind a push by pipeline companies to build new capacity from Canada to Texas - the largest U.S. refining region. Already, producers ship supplies to Oklahoma, well beyond the traditional U.S. Midwest market for Canadian crude. [More here]

• TransCanada Makes Pitch to Legislature (2/7/2008) TransCanada's VP Tony Palmer spoke to the Alaskan Senate Resources Committee and assured them TransCanada could build a gas pipeline to bring the state's North Slope gas reserves to market despite doubts from some legislators and competing companies (including ConocoPhillips, Exxon Mobile Corp. and BP who hold rights to the gas). TransCanada, an independent pipeline company, based in Alberta, was named the only qualifying applicant to meet the requirements of the Alaska Gasline Inducement Act. Competing companies claimed only those who hold the gas can successfully build the pipeline. Palmer countered those companies that produce oil and gas don't handle transporting their product themselves but instead rely on companies such his to move oil and gas to market. TransCanada proposes building a 48-inch pipeline through Alaska to Alberta that is capable of transporting 4.5 billion cubic feet of gas per day. Concerns the gas would go to Alberta to be consumed and not to U.S. Midwestern markets are unfounded according to Palmer. Exxon Mobil claimed to be one of few companies that could build a project that size and keep costs down. Palmer said his company can too noting that in their proposal the company's return is reduced in the event of cost overruns. "TransCanada will be highly motivated to be sure we do the best job we can possibly to do to control costs," he said. Although Gov. Sarah Palin's administration officials have approved TransCanada's proposal, several lawmakers question this decision because TransCanada's application includes qualifications such as requesting a review of tax issues, which may not meet AGIA's requirements. [More here]

• Natural Gas Demand Continues to Drive Worldwide Pipeline Construction Activity (2/5/2008) According to Pipeline and Gas Journal's latest worldwide survey figures, 144,096 miles of oil and gas pipelines are either under construction or planned. North American companies alone are responsible for 46,072 miles of these pipelines. In the U.S. efforts are under way to expand natural gas pipeline capacity to meet unprecedented demand. Of particular note is the Rockies Express (REX) $4.4 billion, 1,678-mile pipeline designed to link natural gas producers in the Rocky Mountain region with eastern U.S. customers. National Fuel Gas Co. proposes building a $700 million West-to-East Pipeline stretching 324 miles from Corning, NY to southeastern Ohio and linking up with REX. The National Pipeline will also link up with the Millennium Pipeline 187-mile pipeline connecting Corning to the New York City metropolitan market. However, these plans face competition from operators of the Rockies Express Pipeline. Williams proposes a 250-mile Rockies Connector Pipeline form Clarington to York County, PA. Spectra Energy's planned Bronco Pipeline will connect Rocky Mountain supplies with under-served western markets via a more than 650-mile pipeline. Willbros U.S. Construction will construct 257 miles of the 560-mile Midcontinent Express Pipelinenning from north-central Texas crossing Oklahoma and Arkansas before ending in Coahoma County, MS. Finally, Boardwalk Pipeline Partners, Energy Transfer Partners and ONEOK Partners have formed a joint venture to construct a $1.1 billion Gulf Crossing 355-mile natural gas pipeline that will originate in southern Oklahoma and extend through northern Texas and terminate in northern Louisiana. [More here]
  

• LNG Suit Getting Noticed (1/30/2008) Energy company AES Corp. and the Baltimore County government are in a federal appeals court to decide whether a liquefied natural gas (LNG) terminal can be built at the former Bethlehem Steel shipyard on Sparrows Point in Maryland. To defeat the controversial LNG project, Baltimore County is using a federally and state mandated program designed to protect coastal areas. So far the county's modified coastal zone management plan has withstood one court challenge from AES Corp. The company wants to build a LNG terminal that will unload imported super-chilled LNG from overseas tankers and return it to its gaseous state. The gas will then be pumped through a proposed 87-mile pipeline to southern Pennsylvania for distribution. AES argues the county overstepped its authority by attempting to interfere with international and interstate commerce. Experts familiar with case say energy companies and local governments nationwide are interested in how successful Baltimore County is in defeating the LNG project. The case could have broader implications for other types of industries as well. [More here]

• Alaska North Slope May Hold 36 Billion Barrels of Oil - US DOE (1/29/2008) The U.S. Department of Energy released a report stating that Alaska’s North Slope still has opportunities, - even though oil and natural gas production in the region has been in decline since 1988. The opportunities rely on Congress opening key areas to exploration and energy prices continuing to be high. Assuming a pipeline is operational between 2016 and 2050, the report states the area could produce up to 36 billion barrels of oil - enough to meet current U.S. demand for five years. It could also supply 137 trillion cubic feet of natural gas - an amount equal to a year and a half of current U.S. consumption. Obstacles include opening to oil drilling parts of the Arctic National Wildlife Refuge (ANWR), National Petroleum Reserve, Beaufort sea and Chukchi sea. If ANWR is not open to drilling, recoverable supplies would drop to 30 billion barrels of oil and 135 trillion cubic feet of gas. Also, construction of new gas pipeline from the North Slope is needed. Without further development of the area, the Trans Alaskan Pipeline System is predicted to hit its minimum flow rate of 300,000 barrels per day (bpd) in the year 2025 down from its peak flow rate of 2.2 million bpd in 1988. [More here]

• Midcontinent Express Pipeline Announces Additional Significant Capacity Commitment (1/28/2008) Midcontinent Express Pipeline LLC (MEP), a 50/50 joint venture between Kinder Morgan Energy Partners, L.P. and Energy Transfer Partners, L.P., announced it has entered into a contract with Newfield Exploration Mid-Continent Inc. (Newfield) for at least 195 million cubic feet per day of natural gas from Newfield's Woodford Shale play in southeast Oklahoma. In conjunction with Newfield's contracted commitment, MarkWest Pioneer, L.L.C. (MarkWest), a subsidiary of MarkWest Energy Partners L.P., will be constructing with MEP a new pipeline from the Woodford Shale to a new receipt point. At close to $1.3 billion, the pipeline project will extend from southeast Oklahoma, across northeast Texas, northern Louisiana and central Mississippi, to interconnect with the Transco Pipeline near Butler, Ala. The approximately 500-mile pipeline will consist of 262 miles of 42-inch, 197 miles of 36-inch and 40 miles of 30-inch pipe, and have up to 13 receipt and/or delivery interconnections. The delivery interconnections will provide access to numerous downstream markets, including those served by the NGPL, Transco, Texas Eastern, Tennessee, Columbia Gulf, Texas Gas, Southern Natural, Destin and ANR pipelines. Subject to receipt of regulatory approvals, Midcontinent Express is scheduled to be in service by March 2009. [More here]