October 2008 Update

In the news...

• Legislators Take Aim at Interior Alaska Gas Bullet Line (10/13/2008) A proposal to build an Alaskan in-state natural gas pipeline has gained new support from Alaskan legislators. Increasing energy costs and air quality concerns have spurred the renewed interest. Possible routes for the "Bullet Line" include a line from the North Slope, which already is producing gas, or the foothills, where Andarko Petroleum Corporation is exploring new reserves, to Fairbanks, AK. Between September 30 and October 1, Alaskan Legislators joined Endstar Natural Gas Company executives in examining possible routes on a trip to northern Alaska. "I'm even more convinced that the Bullet Line gives us an opportunity to jump-start first gas for Alaskans," said Rep. Mike Kelly, a Fairbanks Republican. "We'll have gas sooner, we'll be ready for the big line and we'll have a trained Alaskan work force, I saw nothing but positives. Enstar company spokesman, Curtis Thayer said Enstar has committed $15 to $20 million for preliminary work on a route next year. He added Enstar is interested in working with the state but wants an "independent analysis" of the two suggested routes. Earlier this year, Gov. Sarah Palin announced the Alaska Natural Gas Development Authority, the state and Enstar would work together on developing an in-state line. [More here]

• Natural Gas Pipeline Approved (10/10/2008) ............ ...... On September 18, the Federal Energy Regulatory Commission (FERC) voted 4 - 1 in favor of plans by NorthernStar Energy LLC to build a liquefied natural gas terminal at the Bradwood site on the Columbia River and a 36-mile pipeline connecting Bradwood with an existing natural gas system owned by Northwest Pipeline Corp., near Kelso, Washington. The plan was opposed by Oregon's Governor Ted Kulongoski, local tribes and environmental groups, who are concerned about the facility increasing river temperatures. Legal counsel for the Columbia Riverkeeper, Brett VandenHeuvel, said “Salmon are already struggling because of the heat increase in the Columbia River,” he said. “We are spending millions of dollars every year restoring salmon habitat in the estuary, and this project would degrade it.” The group is currently working with other industries along the river to minimize their impact on the salmon runs. The four FERC commissioners voting in favor of the project did so based on the findings of the environmental impact statement and the increased demand for natural gas in the region. In 2009, NorthernStar Energy plans to start construction and be operating by 2012. [More here]

• Northwest Gas Line to Run South of Idaho's Southern Border (10/8/2008) El Paso Corp. executives Richard Wheatley and Daniel Gredvig said plans to build a 680-mile natural gas pipeline from Opal Hub, Wyoming to Malin, Oregon are on the "fast track". The 370 miles of the $3 billion pipeline will travel through Nevada on its route from Wyoming to Oregon and is the first pipeline to transport gas west from the Rocky Mountain gas fields located in Wyoming, Colorado, Utah and New Mexico. Currently, all other existing or planned pipelines travel in an eastward direction. "This provides benefits for Rocky Mountain gas producers as well as western end users," said Wheatley. The company hopes to have FERC and other permitting completed by 2009 with an operational date starting March 2011. [More here]

• Billion Here and a Billion There - Gas Pipeline Total Escalates In Political Debate (10/4/2008) Six years ago the proposed natural gas pipeline running from Alaska's North Slope to the lower continental U.S. was expected to cost $20 billion. As recently as around a year ago, ConocoPhillips estimated the cost to between $25 billion and $42 billion. While in January TransCanada, the company partnered with the state to build the pipeline, said it will cost $26 billion to get the pipeline to Alberta. However, by this summer, consultants for the state pegged the price at $31 billion. Now Gov. Sarah Palin has raised the price to nearly $40 billion. During the Vice-Presidential debates, Gov. Palin said, “We’re building a nearly $40 billion natural gas pipeline, which is North America’s largest and most expensive infrastructure project ever to flow those sources of energy into hungry markets.” Factors causing the large discrepancies in price include uncertain material costs and major tax and regulatory issues which have yet to be worked out. Only after the entire pipeline is completed will the true cost be known. [More here]

• Grand Prairie Sued Over Gas Line Ordinance (10/2/2008) ... In the first lawsuit of its kind, Chesapeake's subsidiary, Texas Midstream, is suing Grand Prairie over an ordinance passed by the city to oversee the placement of equipment used to push natural gas through pipelines. This is the first time the company has taken a city to court over pipeline regulation. Grand Prairie's city council says it wants to protect its citizens and has the right to decide what a natural gas pipeline operator does in its city. Texas Midstream says pipeline safety is controlled by federal and state authorities, not cities. Attorney Jim Bradbury and Forth Worth's Natural Gas Drilling Task Force member said, "You might believe that the city could and should protect you, but it may in fact be true that they can't. We can do this our way whether you want us to or not." But Bradbury added, he hopes to find a legal solution that protects the rights of citizens and industry. [More here]

• Exxon Quits 2nd-biggest U.S. Gas Area Amid Price Drop (10/2/2008) Exxon Mobile Corp. has sold its stakes in gas fields and an 80-mile pipeline located in the second-largest U.S. natural gas region, Texas' Barnett Shale, to Dallas-based Harding Energy Partners LLC which had formed a joint venture with Exxon in 2006. Harding then sold the gas fields and pipelines to Chesapeake Energy Corp. Exxon cited a supply glut slashing the value of natural gas in half over the past three months as the reason for the sale. Exxon spokesman Patrick McGinn said the company "has a long-standing practice of continually reviewing all assets for their contribution to the company's operating needs and financial objectives, as well as their potential value to others." Details on the terms of the transaction were not disclosed. [More here]

• Another Pipeline Wouldn't Help, Officials Say (10/1/2008) Pipeline officials said a third pipeline running from Louisiana to Cobb County would not have prevented hurricane-induced gas shortages like Ike and Gustav did in the Atlanta, GA area. Last year, Colonial attempted to get approval from Georgia's legislature for the fast-track construction of 460-mile $2 billion pipeline, stating a third line will remove a bottle-neck between Houston and New York. The bill, which would have eased the permitting process was defeated on grounds it would erode property rights and evade environmental scrutiny. “Right now, the third line would not matter; we’re pumping everything we can get,” said Sam Whitehead, a spokesman for Colonial, headquartered in Alpharetta, GA. “This is a refining problem, not a pipeline capacity problem. On the gasoline line, we’re at pre-hurricane rates.” Currently, Colonial has two 36-inch pipelines that can deliver 100 million gallons of fuel a day to the Eastern coast but are operating at less than 85 percent capacity. One pipeline only transports gas and the other aviation fuels, diesel, heating oil and other products. The proposed third pipeline which Colonial still hopes to get approved and operating by 2012, will increase Colonial's capacity to 135 million gallons a day. [More here]

• Global Industries, Ltd. Awarded $75 Million Pipeline Project in PEMEX's Bay of Campeche Ixtal Field (9/29/2008) Global Industries, Ltd. has been awarded a $75 million project from Pertroeos Mexicanos (Pemex) for over 12 km of 24" pipeline. The project consists of several pipeline crossings, riser and expansion curves in Pemex;s Ixtal Field in teh Bay of Campeche. B.K. Chin, Global's Chairman and Chief Executive Officer, stated, "We have a close working relationship with PEMEX, and have been active in the Ixtal Field for well over a year. The award of this project demonstrates PEMEX's confidence in Global as a reliable contractor and solutions provider."[More here]

• Southern California Company Fined for Offshore Gas Shipment (9/29/2008) Pacific Operators Offshore LLC of Carpinteria, CA was fined $450,000 and placed on five years' probation after pleading guilty for transporting natural gas through a pipeline deemed unfit for service off the Southern California. In 2002, U.S. Department of the Interior officials said inspectors discovered the company was transporting natural gas through the pipeine even though Pacific Operators were notified in February 2000 that the line was unfit for service. Charles Cappel, the company's legal counsel, said two of its employees "on limited occasions" sent low and medium pressure natural gas through the pipeline engineered to handled higher pressures. He said, "The action was totally against company policy. They didn't tell anyone what they were doing." After the company learned what happend officials agreed to pay the fine. The pipeline goes to offshore platforms that are no longer operated by the company. [More here]

• Energy Solutions Completes the Oil & Gas Supply Chain with Its PipelineTransporter Gas (PLTG) Solution Certified for Integration with SAP® Solutions (9/24/2008)Energy Solutions International, Inc. a world-leading supplier software for the gas and oil pipeline industries has received SAP® Certified Integration status for the interface between its PipelineTransporter® Gas (PLTG) software, version 4.0 and the SAP® ERP application. "EnergySolutions' customers include many of the world's leading oil and gas transportation companies," said Dr. Jo Webber, chief executive officer, Energy Solutions International. "Increasingly, over the last few years we have seen many of our customers select and implement SAP solutions for their full ERP requirements. In order to provide a full end-to-end integrated solution, from product flow to final invoicing, we are pleased to announce the SAP certified interface between PLTG 4.0 and SAP ERP." PipelineTransporter is an intuitive, nomination, scheduling, allocation and invoicing system that integrates shipper information with critical pipeline and business data to manage the commercial aspects of a pipeline. [More here]

• Shell Hopes to Reroute Auger Pipeline in US Gulf (9/22/2008) In an effort to restart its Central Gulf gathering system, Shell Oil said it hopes to reroute natural gas and oil flows through its Auger pipeline in the Gulf of Mexico around the Eugene Island platform damaged by Hurricane Ike. "Plans are in development to reroute the Auger pipeline system around the damaged Eugene Island 331 Platform," Shell said in a press release. "Work is progressing to restart the Central Gulf gathering system." The Auger pipeline system can transport 415 million cubic feet of gas per day (cfd) and more than 100,000 barrels per day (bpd) of oil. Almost 80 percent of the Gulf of Mexico's 1.3 million bpd of crude and 65 percent of its 7.4 billion cfd of natural gas production remains shutdown. The company said its Boxer, Cougar and Eugene pipeline systems remained down until repairs can be completed. [More here]

• Hurricane Ike: The Aftermath (9/19/2008) ..... ............ ... ... After shutdowns caused by hurricanes Gustav and Ike offshore oil and gas operators are re-staffing their installations. According to the federal government, almost 90 percent of oil and over 75 percent of natural gas production was off-line as of September 19, 2008. Start up had been delayed by required inspections and testing subsea pipelines. Interior Department's Minerals Management Service (MMS) spokeswoman, Eileen Angelico, said oil pipelines need some production running to induce the pressure required for testing while natural gas pipelines are able to keep pressure when shut down. Despite the shutdowns, the Southeast Texas gasoline suppy was sufficient to avoid releasing emergency stockpiles. "Producing platforms in the Gulf now seem generally to have fared well, as did other infrastructure," said Paris-based International Energy Agency. Hurricane Ike has destroyed 49 platforms in the Gulf of Mexico that are responsible for producing approximately 13,000 barrels of oil and 83 million cubic feet of gas per day. The normal daily output for the region is 7.4 billion cubic feet of gas and 1.3 million barrels of oil. [More here]