June 2008 Update

In the news...

• Oil and Gas Industry Veteran Fackrell to Lead Producers' Alaska Gas Line Project (6/12/2008) ConocoPhillips and BP PLC selected oil and gas industry veteran Bud E. Fackrell to be the first president of Denali-The Alaska Gas Pipeline LLC. In April, the two companies announced the project to compete with TransCanada Corp. proposal currently under review by the Alaskan Legislature. "This is a real project for us," Fackrell said. "We are moving forward. We have made a $600 million commitment. The Alaska market is an important piece for us." He added Denali will continue to build its executive team in addition to the 50 field workers collecting data in Tok. By year's end, the goal is to have a 150 employees made up of workers from BP, ConocoPhillips and outside contractors. [More here]

• Some Alaska Lawmakers Seek Quick Vote on Pipeline (6/11/2008) After completing a first round of hearings on a natural gas pipeline project, some lawmakers want to vote now on Gov. Sarah Palin's recommendation to give TransCanada a license for the pipeline and up to $500 million in subsidies. Although the Legislature has until August 1 to back or reject the governor's proposal, State Sen. Con Bunde said money could be wasted if lawmakers take the full 60 days granted by the Alaska Gasline Inducement Act. He added the Legislature's consultants hired to analyze the proposal concluded no harm could come from the license. However, Sen. Charlie Huggins said there is still too much to learn and a vote now implied the Legislature is only rubber-stamping Gov. Palin's proposal. House Minority Leader Beth Kerttula said each argument has merit, but added, "Let's hear all of it out." "Would I like to get a vote on this now and save all the time, energy and money? Absolutely," she said. "But am I willing to go through the slides, the presenters and all the information. That's probably the wisest." [More here]

• U.S. EPA Rejects ConocoPhillips Refinery Expansion (6/10/2008) The U.S. EPA upheld a challenge to air permits granted by the Illinois EPA and required by ConocoPhillips to expand its largest U.S. refinery - Wood River Refinery - in Roxana, Illinois. The legal challenge by environmental groups and led by the Natural Resources Defense Council (NRDC) argued that harmful air pollution from the refinery was not being adequately controlled. NRDC senior attorney, Ann Alexander said "Excessive emissions from this expanded refinery would have harmed the health of everyone in the region." She added "We are not asking for hugely complicated or costly measures... Holding flare emissions down just requires sound engineering and responsible operating practices." The Wood River Refinery expansion is tied to the proposed 1,840-mile pipeline from Hadisty, Alberta. The pipeline, to be jointly developed with TransCanada, will be used to transport crude oil from Canadian tar sands. Without the proposed expansion, Wood River refines around 306,000 barrels of oil per day. [More here]

• TransCanada Bewildered by Gazprom's Alaska Offer (6/10/2008) TransCanada is surprised about reports claiming OAO Gazprom, Russia's natural gas exporter and operator of the world's largest gas pipeline network, wants to talk about TransCanada's proposed $26 billion Alaska pipeline. "All I've seen are the press articles. TransCanada has not been approached by Gazprom," said Tony Palmer, TransCanada's vice-president of Alaska development. "TransCanada has offered parties that commit gas in the initial open season that we're prepared to offer equity to and, to this point, we don't know if producers will take us up on that offer. But those are the parties we would be approaching first to become potential partners in the project," he added "(Gazprom) is not a producer in Alaska today." According to Bloomberg, Gazprom is in talks with ConocoPhillips and BP PLC about partnering on a competing pipeline proposal. Bloomberg also reported Alexander Medvedev, Gazprom's deputy chief executive, says they are in talks with BP and ConocoPhillips and his company will "soon" begin talks with TransCanada. He went on to say "We don't just want to participate; we want to bring value," adding either project will cost "dozens of billions of dollars". Edward Jones energy analyst Lanny Pendill thinks Gazprom is using any means to get access to the United States gas market. He said a partnership would allow the company to "get its foot in the door". Last month Gazprom struck a deal with Enbridge Inc., Gas Metro and Gaz de France to supply a 500 million cubic feet per day of gas to the proposed $800 million Rabaska liquefied natural terminal east of Quebec City in exchange for an equity stake in the project. [More here]

• Oil Will Peak at $150-200 - Barron's Interview (6/8/2008) Barron's magazine interviewed Goldman oil strategist Arjun Murti, who among other things, in 2004 predicted the current oil "super spike." He now sees oil peaking somewhere between $150 and $200 a barrel or, in other words, $5.75 a gallon. Murti says pipeline companies such as Oneok and El Paso stand to benefit from the United States' need to expand its pipeline infrastructure. Ultimately he does not believe $150-200 is sustainable and expects prices to fall back to $75 a barrel after people have changed their energy consumption behavior (e.g. driving less) - some time in the next 20 years. How long prices stay high is anyone's guess. [More here]

• Pipeline Will Be Finished on Time, Brunswick Vows (6/8/2008) Emera-owned Brunswick Pipeline says its controversial natural gas pipeline will be completed on time. The 145-kilometer pipeline that runs through southwest New Brunswick (NB) to connect with the Maritimes and Northeast Pipeline at the U.S.-Canada border near St. Stephen, NB will deliver natural gas from the Canaport LNG facility near Saint John. The proposed route caused a public outcry from Saint John area residents because it is due to run through parts of Saint John, including Rockwood Park and across the St. John River. Company spokeswoman Susan Harris said crews are restoring the park and preparing for the pipeline's crossing of the St. John River. She said the company hopes to have gas flowing through the pipeline for its November in-service date. [More here]

• Temple University Study of Pulsed Electromagnetic Fuel Treatment Yields Dramatic Results in Reducing Oil Viscosity (6/5/2008) Save the World Air, Inc. (STWA) has concluded tests conducted by Temple University's Department of Physics and sponsored by a major international engineering and oil refinery construction company. The results confirmed earlier tests showing substantial reductions in the viscosity of heavy crude oil, when treated with a patent-pending pulsed electromagnetic device. Crude oil densities are measured using American Petroleum Institute (API) gravity. The higher the number the less dense or the "lighter" the crude oil is. Oil API gravities of less than 21.5 are considered to be "heavy crude" while Brent crude's API of 38 is considered to be "light crude." Researchers using pulsed electromagnetic technology, without the heat factor, were able to reduce viscosities by 16% for API 11 and 19% for API 21. The results indicate heavy crude oil can be moved faster and more efficiently through pipelines from the wellhead as well as other applications in the transportation and refining process. Temple Physicist Dr. Rongjia Tao stated in his report, "We are very confident that STWA's licensed technology will be able to reduce the viscosity of crude oils, similar to API 21 by 30% with the electromagnetic treatment technology." The technology can be very beneficial to the oil industry, given the quantity of heavy crude available throughout the world, which up to now has been prohibitively expensive to extract. [More here]

• Enterprise's Repair of Independence Pipeline May Cut Gas Prices (6/4/2008) A leak in the 134-mile 24-inch diameter Independence Trails pipeline has been fixed after 55 days of repairs. The $286 million natural gas pipeline owned by Enterprise Products Partners LP moves gas from the Independence Hub, located under 8,000 feet of water in the Gulf of Mexico. The Hub when fully operational produces 1 billion cubic feet a day or 2 percent of U.S. gas supplies and represents 10 percent of all deliveries from the Gulf. The leak originated in an O-ring gasket on a pipeline flex joint under 85 feet of water causing the shutdown of the pipeline on April 9. Natural gas futures have risen 26% to $12.221 per million Btu on the NY Mercantile Exchange since the shutdown. After Enterprise announced resumption of service, natural gas futures fell by as much as 1.6 percent to $12.06. Enterprise has more than 35,000 miles of pipelines. [More here]

• TransCanada Says It May Seek to Build Peruvian Gas Pipeline (6/3/2008) As part of its strategy to satisfy increasing North American demand, TransCanada confirmed it may pursue building a natural gas pipeline in Peru. "It's purely an exploratory activity at this point,'' said company spokeswoman Shela Shapiro. "The idea has some inherent possibilities.'' The company may team up with Brazil's state controlled oil company, Petroleo Brasileiro SA, to become the third group to bid on the approximately $1.2 billion pipeline. TransCanada owns Canada's largest natural gas pipeline system with more than 36,669 miles of pipeline in the U.S., Canada and Mexico. "It's a logical fit for Peruvian gas to get into the North American market," said Shapiro, adding the Peruvian project suits the company's strategy of linking producing regions with North American consuming markets. Peru is South America's fifth largest natural gas producer and is expected to double gas output over the next four years. [More here]

• Alaska Governor Proposes $500 Million in Subsidies for a Gas Pipeline (5/23/2008) Alaska Gov. Sarah Palin is suggesting $500 million in matching funds to subsidize the construction of a natural gas pipeline proposed by Canadian company TransCanada. The 1,715-mile pipeline would cost between $30 billion and $60 billion and transport gas from Alaska's North Slope to markets in the lower U.S. and Alaska. It could eventually supply up to 7 percent of the United State's current natural gas use. “A domestic supply of clean energy, you can’t go wrong with this,” Ms. Palin said. “We’re ready to tap it.” However, Bert Stedman, State Senator and vice chairman of a special Senate committee reviewing the proposal, said Gov. Palin's plan appears to take a great risk by granting so many incentives to TransCanada when the company has no commitment to use the pipeline from producers that own gas rights on the North Slope. A rival pipeline plan from two of the three major North Slope producers - BP and ConocoPhillips - was announced in April and the companies say they have committed to spending $600 million on early development of the pipeline. Gov. Palin countered her plan is superior because it included "enforceable commitments" from TransCanada and gas producers wanting to use the pipeline with an option to allow new companies to use it at reasonable rates. [More here]

• Canada's Oil and Gas Front Man Calls It Quits (5/22/2008) Canada's top oil and gas sector advocate, Pierre Alvarez, president of the Canadian Association of Petroleum Producers (CAPP), resigned Wednesday May 21st but said he will stay with the powerful lobby group until a successor is found. The announcement precedes another announcement, made on May 22nd, that David MacInnis, president of the Canadian Energy Pipeline Association (CEPA) is to become VP of policy, government and public affairs at Chevron Canada Ltd. CEPA, which lobbies on behalf of Canada's pipeline industry, has promoted current VP, Brenda Kenny, to the position vacated by MacInnis. [More here]

• Planned Pipeline to Carry North Dakota, Montana Natural Gas (5/20/2008) Williston Basin Interstate Pipeline Co., a unit of MDU Resources Group Inc. is planning on building a 100-mile 16-inch natural gas pipeline from Bakken shale formation in Montana and North Dakota to an existing pipeline that transports gas to Chicago, Illinois. The pipeline, estimated cost to be between $50 million and $75 million, will initially carry 100 million cubic feet of gas per day and ultimately up 200 million daily, according to company spokesman Tim Rasmussen. The company hopes to have the pipeline completed by mid-2010. [More here]

• REX-West Fully Operational (5/20/2008) Rockies Express Pipeline LLC, a joint venture of Kinder Morgan Energy Partners, LP, Sempra Pipelines and Storage and ConocoPhillips, announced the final 210 miles of the Rockies Express West pipeline (REX-West) are now in service. Approximately 500 miles of the 713-mile 42-inch diameter pipeline that travels from the Cheyenne Hub in Weld County, Colorado to Audrain County, Missouri started service January 12. REX-West pipeline now has a natural gas capacity of 1.5 billion cubic feet per day (Bcf/d). Pending regulatory approval, the company will begin construction of REX-East, a 638-mile pipeline extending east from Missouri to Clarington, Ohio. The entire REX project is expected to operating by June 2009. [More here]

• Canadian Superior Plans Gas Line for U.S. Northeast (5/20/2008) Canadian Superior Energy Inc. and Global LNG Inc. will collaborate through their joint venture - New Jersey-based Excalibur Energy Inc. - on a $550 million liquefied natural gas project. The Liberty Natural Gas Transmission Project includes a deepwater pipeline system 15 miles off the coast of Asbury Park, New Jersey and an import buoy used to process as much 2.4 billion cubic feet of gas from drilling sites off Trinidad and Tobago. Last year, the Caribbean country was the leading supplier of natural gas to the U.S., accounting for 3.4 percent of the U.S. gas supply, according to Energy Department data. Previous U.S. Northeastern projects have been delayed or stopped by citizens and state governments concerned about security and the environment. Excalibur CEO Roger Whelan said the liquefied natural gas will be delivered "without compromising safety or the clean waters off the Jersey shore.'' The company hopes to have the pipeline operational by late 2011. [More here]

• FOCUS: Florida Readies for First US Ethanol Pipeline (5/19/2008) Kinder Morgan, the largest U.S. independent energy pipeline operator, is converting its 104-mile 16-inch gasoline pipeline running from Tampa to Orlando to transport both gasoline and ethanol later this year. "We're doing lab tests with different metals for the pipeline now and will have our first experimental ethanol run through the line in September," said Jim Lelio, Kinder's business development director. "If early runs are successful, commercial operations will start later this year. Gasoline will move through the line, followed by ethanol, and a small amount of intermingling will occur where the two meet, in what's called a transmix." Ethanol attracts water and when mixed with oxygen can cause pipes to crack; both problems must be solved by Kinder engineers before the pipeline can operate. Ethanol is derived domestically from Midwest corn and abroad from sugar cane in Brazil, the Caribbean and Central America. It enters Tampa by boat and train and will be stored in well sealed tanks before being piped to Orlando and sold by central Florida gas stations in a 10% ethanol blend E-10. [More here]