June 2009 Update

In the news...

• Guarantees Not Offered for Mackenzie Line - Canada (6/24/2009) Concerned about competition from the proposed Alaska gas pipeline, officials from the Northwest Territories of Canada said Ottawa may need to provide loan guarantees up to C$24 billion for the Mackenzie Valley gas pipeline project. The U.S. Senate introduced a bill that would increase loan guarantees for the Alaskan natural gas pipeline to $30 billion. However, Canadian Environment Minister, Jim Prentice, said the government of Canada has not discussed giving loan guarantees or whether they might be considered in the future. Officials from the Northwest Territories are hoping the loan guarantees might jump start construction on the proposed pipeline, which would carry up to 1.9 billion cubic feet of gas per day from the Mackenzie River Delta located on the Beaufort Sea to Alberta, Canada. The project has languished for years and construction of the Alaska pipeline would likely eliminate any chance of it being built. [More here]
  

• Green Group Asks U.S. to Bar Canada Oil Sands (6/24/2009) Environmental group, ForestEthics, has asked U.S. Secretary of State Hillary Clinton to deny permits for pipelines that would transport oil extracted from Canada's oil sands (also known as tar sands) to refineries in the United States. The green group has especially targeted Enbridge Energy Partners LP's Alberta Clipper pipeline. The group says oil from the tar sands generates up to five times more greenhouse gas emissions than oil from conventional sources. Enbridge spokeswoman Denise Hamsher said the pipeline is the basis for the U.S. State Department's decision not the source of oil production, adding that 1 million barrels a day of oil from Canada's oil sands is currently exported to the United States. State Department spokesman Andrew Laine said the State Department was reviewing the Alberta Clipper pipeline project "and it is premature to comment while the review process is ongoing." [More here]
  

• Keystone Pipeline Work Bogged Down by Weather (6/23/2009) After having ideal weather conditions in May, construction efforts on TransCanada's Keystone oil pipeline have been stymied by an unusually wet June. Work on the 130-mile, 30-inch section that runs west of Seward, Nebraska to the Kansas border has been hindered by standing water in deep trenches excavated for the pipeline. Keystone spokesman Jeff Rauh said they were at least a week away, possibly longer, from laying pipe in the mud filled trench. Keystone builders expect to finish work on the Nebraska section of the $5.2 billion pipeline by the end of 2009. [More here]

• Aboriginal Group Turns to Ottawa on Pipeline (6/23/2009) The North West Territories (NWT) first nations and Inuit groups who make up the Aboriginal Pipeline Group (APG) are seeking a larger stake in the C$16.2 billion Mackenzie gas pipeline project. The move, which would require huge federal loan guarantees, could eventually give the group a majority share in the project and allow the Canadian government to impart substantial fiscal incentives to construct the long-delayed pipeline project. Currently, APG has rights to one third of the 1,220-kilometer pipeline that will be filled with natural gas produced by Imperial Oil Ltd. (of which 70 percent is owned by ExxonMobil), Royal Dutch Shell PLC, ConocoPhillips Canada (North) Ltd. and ExxonMobil Canada Properties Ltd. Environment Minister Jim Prentice, who is accountable for the pipeline project, said AGP will increase its ownership share by financing more of the project's construction costs but it is not readily apparent how AGP will pay for those costs. [More here]

• Ruby Pipeline Clears Step (6/22/2009) The U.S. Federal Energy Regulatory Commission (FERC) has issued a draft environmental impact statement (EIS) for the proposed Ruby Pipeline project, noting most adverse environmental impacts could be mitigated. According to the EIS draft, the 678-mile pipeline that would transport natural gas from the Opal hub in western Wyoming through parts of Utah, Nevada and Oregon, spans large greenfield areas that currently do not have linear infrastructure such as existing pipelines, roads or power lines. The Ruby Pipeline, an entity of El Paso Corp., is competing against proposals from other pipeline companies and still needs FERC approval on terms of service and shipping rates. If built, the pipeline will have a capacity of 1.5 billion cubic feet of gas per day and be able to serve 150,000 homes a year in West Coast markets. [More here]

• OSD Pipelines Purchases Network License for PipelineStudio Design and Simulation Software (6/17/2009) Houston-based Energy Solutions International, Inc. (ESI), which supplies software solutions to optimize operational and commercial pipeline performance will deploy itsPipelineStudio® design and off-line simulation software for the oil and gas division at OSD pipelines. OSD, a global pipeline engineering services company based in Australia, purchased a network license based onPipelineStudio's "ease of use, speed and accuracy of its results." [More here]

• New Pipeline Aims to Take a Bite Out of Oilsands Emissions (6/17/2009) Williams Co. plans to build a 260-mile, 12-inch natural gas liquids pipeline in Alberta, Canada from its extraction plant located in Fort McMurray to its processing facility in Redwater. “The pipeline will support the future removal of ethane from the oilsands off-gas, which will further decrease greenhouse gas and sulfur dioxide emissions and it provides a critical feedstock for Alberta chemical companies,” said Alan Armstrong, president of Williams’ midstream business. Currently, Williams is the only processor of oilsands off-gas. Construction of the $283 million pipeline will allow the company to reduce emissions of carbon dioxide (CO2) by 219,000 tons per year and sulphur dioxide (SO2) by 3,200 tons per year. The pipeline is expected to be completed by April 2012. [More here]

• TransCanada Pays $550 Million for Rest of Keystone Line (6/16/2009) TransCanada is purchasing all of ConocoPhillips interest in the Keystone pipeline for $550 million as well as the assumption of $200 million in short-term debt. The deal gives TransCanada complete control over the 2,148-mile, $5.2 billion crude oil pipeline that runs from Alberta, Canada to southern Illinois in the U.S. and is designed to carry 435,00 barrels of crude per day. The company also sold C$1.6 billion in stock to help finance the deal, which is expected to be completed in the third quarter. [More here]

• Demand for Arctic Gas Dries Up (6/14/2009) ................ After years of worrying about natural gas supply shortages, recent discoveries of approximately 1,200 trillion cubic feet of gas in shale deposits located in the continental U.S. and increasing imports of liquefied natural gas has led one energy executive to conclude demand for Arctic gas will be pushed back by 15 years. Steve Letwin, Enbridge Inc.’s executive vice president of gas transportation and international, says the North American natural gas industry is now "overbuilt." “The biggest issue that we now have is [insufficient] demand,” said Mr. Letwin. “And in the absence of demand, you are going to see a price for gas that is going to be kept between $5.00 and $7.00 for a long time to come.” Since the beginning of the year natural gas prices have fallen 30 percent to $3.857per million British thermal units . Although continental U.S. shale producers can make money at low gas prices, it won't be until 2025 when gas from the Arctic region will be economically viable - given the high cost of transporting the gas -- be it from Canada's Mackenzie Delta or Alaska. [More here]

• 'Big Gorilla' Exxon Joins $26 Billion Alaska Pipeline (6/11/2009) After sitting on the sidelines, Exxon Mobil Corp. has decided to help TransCanada Corp. finance and construct a $26 billion, 1,700-mile pipeline to carry natural gas from Alaska's North Slope to conduits in Alberta, Canada. In addition, the company will own a minority stake in the project. The announcement comes less than six months after Alaska state officials decided not to pursue the eviction of Exxon and its partners, including BP Plc and ConocoPhillips, from the Point Thomson field after decades of inaction. “Exxon Mobil has always been considered the ‘big gorilla’ necessary for this project to succeed, so their willingness to get involved and make a substantial financial investment is warmly welcomed,” U.S. Senator Mark Begich, an Alaska Democrat. Last year, TransCanada won state government support and $500 million subsidies for the project. The Denali pipeline, a proposal from BP and ConocoPhillips, is still competing for the business. Exxon expects to begin production at the Point Thomson field, located 50 miles east of Prudhoe Bay, in 2014. [More here]

• Energy Solutions International and ECIL Work Together on Expansion of PipelineManager® in India (6/10/2009) Energy Solutions International, Inc. (ESI), a world-leading supplier of software solutions that optimize operational and commercial performance of oil and gas pipelines, announced that ECIL had chosen PipelineManager® to expand and upgrade their client pipeline management systems. "We are very happy to continue our strong working relationship with ECIL," said Siva Rao, Vice President, Energy Solutions International (India) Pvt. Ltd. "We believe that working together we will deliver the highest quality pipeline technology to our customers, BPCL and PCCKL." [More here]

• Crosstex Energy to Sell Some Pipeline Assets for $220 Million (6/10/2009) Crosstex Energy LP, a partnership partly owned by Crosstex Energy Inc., is selling pipeline assets located in Mississippi, Alabama, and South Texas to Southcross Energy LLC for $220 million. The deal is expected to be completed on July 31. Proceeds from the sale will be used by Crosstex Energy to reduce debt. [More here]

• Key US Crude Oil Link Capline Restarted (6/9/2009) Capline, a major crude oil pipeline operated by Shell Pipeline Co. LP, was restarted after crews repaired a minor valve leak. The 632-mile pipeline travels from the U.S. Gulf Coast to the Midwest and transports up to 1.1 million barrels per day of oil. Customers were not affected by the brief shutdown because Shell had enough crude in storage. The pipeline is owned by several companies, including Marathon Oil Corp and BP PLC. [More here]

• South Dakota Sets November Hearing for Keystone Oil Pipeline (6/9/2009) The Public Utilities Commission (PUC) of South Dakota will hold a formal hearing on November 2 for TransCanada's application to build its proposed Keystone XL Pipeline through western South Dakota. The 313-mile, 36-inch section of the proposed crude oil pipeline will enter South Dakota at the Montana border in Harding County and exit to Nebraska at Tripp County. The South Dakota section is estimated to cost $920 million and is part of a project that will transport oil from the Alberta tar sands to refineries and terminals located on the Texas Gulf Coast. The company hopes to begin construction of the pipeline in 2011 with operations commencing in 2012. [More here]

• US Bill to Raise Alaska Gas Pipeline Loan Guarantee (6/8/2009) Several leading legislators in the U.S. Senate have reached an agreement to increase the loan guarantees for building a huge pipeline to transport natural gas from Alaska to the lower 48 States. Senator Jeff Bingaman (D-NM), chairman of the Senate Energy and Natural Resources Commitee and Senator Lisa Murkowski (R-AK) have agreed to a deal that calls for raising the 2004 loan guarantee from $18 billion to $30 billion. Under the new agreement the federal government will repay loans up to 80 percent of the cost for the pipeline project in the event the owners default on the financing. TransCanada Corp was awarded a state licence in December from Alaska to build the pipeline, but a competing proposal from BP Plc and ConocoPhillips is also in the works. [More here]

• Atlas Pipeline Partners Forms Joint Venture With Williams (6/2/2009) Atlas Pipeline Partners, L.P., and a subsidiary of The Williams Companies, Inc. have finalized their agreement to form a joint venture company - called Laurel Mountain Midstream, LLC. The joint venture owns, manages and operates all of Atlas Pipeline's northern Appalachian assets as well as two natural gas processing plants and associated pipelines located in southwestern Pennsylvania. In exchange for $100 million and a $25.5 million note payable to the joint venture, Williams retains 51% ownership interest while Atlas owns 49% of the joint venture. [More here]

• SemGroup's White Cliffs Pipeline Begins Commercial Operation (6/2/2009) SemGroup, L.P.'s White Cliffs Pipeline has started operations. The 12-inch, 525-mile pipeline will transport crude oil from a location near Platteville, Colorado to company owned and operated storage tanks located in Cushing, Oklahoma. The current capacity of approximately 30,000 barrels per day (bpd) can be increased up to 50,000 bpd. White Cliffs Pipeline is indirectly owned 99.17% by SemGroup, L.P., 0.415% by Anadarko Wattenberg Co., LLC, and 0.415% by Samedan Pipeline Corp. . [More here]

• DNV, Gassco Develop New Gas Pipeline Inspection Technology (5/29/2009) Norway based Det Norske Veritas (DNV) and gas pipeline operator Gassco have developed an economical way to inspect natural gas pipelines utilizing acoustic resonance. According to the companies, the technology allows measurements to be taken without reducing gas flows. Trials on Gassco's pipelines were so successful that Gassco and DNV have entered into a joint venture to commercialize the technology. "For us, this means that inspection and maintenance costs can be sharply reduced while enhancing the quality of the inspections," said Gassco's Chief Executive Brian Bjordal. [More here]

• Tulsa-Based 798 Welders Built the Alaska Pipeline (5/29/2009) In 1968, the largest oil field in North America was discovered in Prudhoe Bay, Alaska by Humble Oil and Refining Company (now Exxon) and Atlantic Richfield Company (ARCO). But it wasn't until the OPEC oil embargo in 1973 that serious consideration was given to developing the find. The only feasible way to transport the oil to market required the constructions of a 48-inch, 800-mile pipeline that needed 108,000 perfect and, at times difficult "girth" welds. Tulsa, Oklahoma-based Pipeliners Local Union 798, a team of journeymen welders, who spent years perfecting their craft were tapped to do the mammoth job. “Every weld was challenging in one way or another. The cold was always a big factor. The pipe sections had to be heated up in order to get a good weld. The lineup clamps would freeze to the inside wall of the pipe and we’d have to thaw them loose. The wind, the terrain, blizzards, everyday was a challenge,” according to Tulsa 798er, Kevin Leeper. The project culminated when the last thousand feet of pipeline required the scaling of a steep and jagged rock cliff. On June 20, 1977, oil began to flow from Prudhoe Bay helping to meet the energy demands of the lower 48 states. [More here]