April 2008 Update

In the news...

• Pipeline Setback Gives Oil A Lift (4/14/2008) ... . . Disruption in a major U.S. oil pipeline was a factor in causing the May-date West Texas Intermediate crude contract price to briefly trade above $111. Royal Dutch Shell's Capline pipeline shut down on April 11 after a leak was discovered by a Tennessee worker. The pipeline transports 1.1 million barrels of oil per day from Louisiana to Illinois, feeding BP's Whiting, Indiana refinery and Marathon Oil's refinery in Catlettsburg, Kentucky. A Shell representative was not sure when the pipeline will be back online. [More here]

• Denali Pipeline To Surpass Alaskan Pipe In Cost, Regs (4/11/2008) In addition to higher steel costs, the proposed Denali natural gas pipeline faces strict environmental laws and a mountain of regulatory challenges seldom seen in the 150-year history of the global oil industry. The pipeline project, which takes its name from North America’s tallest peak – Denali, also known as Mt. McKinley – is currently awaiting a critical $600 million open season process and will have to obtain approximately 1,000 permit approvals from the U.S., Alaska and Canada. The pipeline will follow the existing Trans Alaska pipeline thus avoiding the environmentally sensitive Arctic National Wildlife Refuge. Cost for metal to construct the pipeline could reach $6 billion alone and it could take 10 years to complete vs. the nine years needed for the Trans Alaska pipeline. The total cost is expected to be $30 billion, which, ironically is the same as the inflation-adjusted cost of the Trans-Alaska pipeline. When completed, the Denali pipeline could transport 8% of the current U.S. natural gas supply. [More here]

• Gas Plant in L.I. Sound Is Rejected (4/11/2008) . ........ . . New York Gov. David A. Patterson blocked a proposal to build the nation's first floating liquefied natural gas plant in the Long Island Sound. “One of my goals as governor is to protect Long Island Sound,” Mr. Paterson said at Sunken Meadow State Park, on Long Island. “Shame on us if we can’t develop a responsible energy policy without sacrificing one of our greatest natural and economic resources.” Gov. Patterson added the region can find other more responsible ways to obtain energy. The Broadwater Energy plan called for construction of a $700 million natural gas terminal as well as a 22-mile underwater pipeline that connects to the existing Iroquois pipeline that serves New York and Connecticut. John Hritcko, senior vice president and regional project director for Broadwater, an energy consortium consisting of Shell Oil and TransCanada Pipelines, said the rejection represents a “missed opportunity” to lower energy prices for consumers and businesses. Broadwater opponents argued the terminal would be vulnerable to a terrorist attack and jeopardize traditional industries like fishing and oyster harvesting. [More here]

• Exxon Mobil May Join BP, ConocoPhillips Pipeline (4/8/2008) Spokeswoman Margaret Ross confirmed Exxon Mobil was invited to participate in the new ConocoPhillips and BP PLC Denali natural gas pipeline project in Alaska. "ExxonMobil was only made aware of the ConocoPhillips-BP plan a few days prior to the announcement," she said. "We need to better understand their approach to ensure that it will lead to a commercially viable development on a cost and schedule basis that will deliver maximum benefits to the State of Alaska, the producers and consumers in the United States and Canada." [More here]

• JayHawk Energy Inc. Announces The Acquisition Of A 16-Mile Pipeline (4/1/2008) JayHawk Energy Inc. has purchased assets from Galaxy Energy Inc., a private company in Crawford and Bourbon counties of Kansas. The assets include a sixteen (16) mile gas pipeline and gas production within 6,500 acres of land bordering the pipeline for $2 million. [More here]

• Company Seeks Gas Pipeline (3/29/2008) . ....................... ConocoPhillips plans to develop a pipeline to transport natural gas from Alaska's North Slope to the lower 48 states and Canada. The company estimates the entire project will cost between $25 billion and $42 billion and move about 4 billion cubic feet of natural gas per day. The company also said it is "prepared to make significant investments, without state matching funds, to advance this project." In a prepared statement ConocoPhillips Chairman and CEO Jim Mulva said the company hopes to work directly with the state of Alaska to expedite the project, as well as partner with other companies including Exxon Mobil Corp., BP PLC and possibly a pipeline company. BP spokesman Steve Rinehart could not speculate on the offer and Exxon Mobil had no comment. ConocoPhillips is in the process of gathering data to support its pipeline permit application. A proposed deal between North Slope producers BP, Exxon Mobil and ConocoPhillips and former Alaskan Gov. Frank Murkowski fell through last year. [More here]

• More Than A Pipe Dream (3/28/2008) ............................ .... It seems like America is getting high on natural gas. With around 25 pipeline projects and 11 storage projects, natural gas pipeline builders are in the midst of a building boom. One of the longest pipelines ever built - the 1,678-mile Rockies Express - is near completion and the industry has not been this busy since the 1950s, according to consulting group Bentek Energy. However, many uncertainties lie ahead. Supply depends on drillers' ability to ramp up production and some pipeline builders face a labor shortage. Competition is fierce since pipeline builders need to get right-of-way before anybody else does while keeping costs under control for their customers. Although the need to construct pipelines is driven largely by the demand from energy consumers, it is also driven by the discovery of new supplies. Shallow natural gas fields in the Gulf of Mexico are almost exhausted but new drilling technology now enables access to the deepest fields. As a result, new construction is now based on speculation about future production instead of on current production. Government regulation of everything from utilities to right-of-way and greenhouses gases affects pipeline builders. The ongoing construction boom may lead to overcapacity, depending on the outcome of many of these factors. It will take years before that unknown will be resolved. [More here]

• Pipeline Would Take Rockies Gas To Markets In U.S. And Canada (3/26/2008) Two pipeline companies - Alliance Pipeline Inc. and Questar Overthrust Pipeline Company - plan to build a 42-inch, 800-mile Rockies Alliance Pipeline from Wyoming to Canada, U.S Midwest and Northeast. The estimated $3.5 billion project will transport natural gas from Wamsutter, Wyoming, traversing Wyoming, Montana and North Dakota, on its way to the Emerson trading hub located on the Minnesota-Canada border. Brian Jeffries, executive director of the Wyoming Pipeline Authority, said the Rockies Alliance project can provide new markets for the state's natural gas and is one of five pending pipeline proposals. A sixth, the Rockies Express, is already under construction. Questar and Alliance will start taking bids from customers interested in using the pipeline on May 1st. Subject to financing and regulatory approval, the companies plan to have the whole pipeline operating by fall of 2011. [More here]

• Alaska Senator Stresses Gas Line (3/19/2008) ................ U.S. Alaskan Senator Lisa Murkowski told members of the Alaskan Legislature that time is running short for Alaska to get a natural gas pipeline project started on its North Slope. During her annual speech she said, "We are slipping and cannot afford to slip any further. Our competitors are moving ahead. Our oil production is dropping. Steel and construction prices just climb higher every year." Although Sen. Murkowski didn't criticize Gov. Sarah Palin's Alaska Gasline Inducement Act (AGIA) she placed the onus to get things moving equally on pipeline companies, the federal government and North Slope lease holders - ConocoPhillips, Exxon Mobil Corp. and BP PLC. TransCanada was the only applicant to comply with regulations established in AGIA. However, ConocoPhillips is promoting a competing plan outside the state's bid requirements but it is seeking what it calls fiscal certainty - long-term tax and royalty terms for the North Slope lease holders before a pipeline license is awarded. Sen. Murkowski commented "I recognize the value of the AGIA process. But, clearly Conoco is on its own track. Is it wrong to have a duel track? In my opinion, anything that will get us a gas line sooner is worthwhile." [More here]

• New Pipelines Will Even Out Gas Prices (3/15/2008) . ....... . Last fall in the Rocky Mountain region of the U.S., due to excess production and limited pipeline capacity, spot prices for natural gas producers dropped to a low of only 5 cents per 1,000 cubic feet. For consumers in the region the surplus has been a boon. However, after years of low prices, things are about to change. A new pipeline - 1,678-mile Rockies Express from Meeker, Colorado to Clarington, Ohio - is almost finished and is now partly operational. The pipeline, with a capacity of 1.6 billion cubic feet per day, will allow gas suppliers to sell to other markets including California, Phoenix, Arizona and Midwest area. In addition to gas suppliers making more money, analysts predict the new pipeline will even out national supplies reducing price spikes elsewhere, especially in the East. This change could be at the expense of those consumers located the Rocky Mountain states. Producers counter as long as production continues to ramp up, local prices should stay under control. Although Texas is currently the country's biggest producer of gas, the Rockies region most likely contains more than 200 trillion cubic feet of natural gas reserves - enough to supply the U.S. for 10 years. [More here]

• TransCanada Ready To Start Building U.S. Oil Line (3/14/2008) TransCanada Corp. plans to start construction on its 2,148-mile, $5.2 billion Keystone oil pipeline the second quarter of this year. A key factor in the decision to start building was a presidential permit issued by the U.S. State Department for the construction of a 590,000 barrel per day pipeline at the Canada-United States border. "The U.S. Department of State has determined that this is in the national interest, so after a culmination of years of hard work we're certainly pleased to have the permit," said TransCanada spokeswoman Shela Shapiro. The pipeline, co-owned by ConocoPhillips, will extend from Alberta to Oklahoma and southern Illinois. Part of the Canadian side of the pipeline will use an existing natural gas pipeline converted for transporting oil. The pipeline is targeted to be in service in late 2009. [More here]

• Canadian Pleads Guilty In Oil Pipeline Bomb Plot (3/13/2008) Canadian Alfred Reumayr of British Columbia pleaded guilty to charges of plotting to blow up the Trans-Alaskan oil pipeline on January 1st, 2000, at the U.S. District Court in Santa Fe, New Mexico. After being arrested in August 1999 by the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosive and the Royal Canadian Mounted Police, Mr. Reumayr was accused of soliciting the help of a U.S. citizen to bomb the Trans-Alaska Pipeline System. Prosecutors said Mr. Reumayr acquired explosives, which he planned to locate at three points along the pipeline in order to disrupt energy supplies. They said Mr. Reumayr also hoped to profit from the attacks by purchasing energy securities at low prices and then selling them after the attack during the market turmoil resulting from the attacks. [More here]

The Natural Gas Industry Lags When it Comes to Integrating Data

Even with all the technological advances over the last ten years, the natural gas industry still struggles when it comes to integrating operational and commercial data. The industry is state-of-the-art in tracking SCADA and real time operational data. Much can also be said about the commercial side of the business with its scheduling, nomination, and allocation processes. However, when it comes to merging real-time operational data with commercial accounting data in order to get a real-time financial look at a pipeline, the industry lags.

Departments within an organization are often very distinct and operate with different priorities. Operations focuses on running the pipeline and would like to have commercial/accounting data to make better decisions. Commercial and accounting focus on revenue and need to see how they are doing right now (before official measurement close). While they both need each other’s data, they are often hesitant to share it based on the fear that it may be misinterpreted. It’s not uncommon to have two different numbers being reported because the data was viewed differently. That just causes frustrating reconciliations – and often finger pointing – all trying to get to the “real” number.

Recent software advances make this integrated data more readily available – without the grinding behind-the-scenes effort historically needed to consolidate the information. However, companies need to commit to a process, tear down the silos within the organization, and do some up-front work without grousing about “how this didn’t work in the past.”

The result will be a world class organization that can have its data available to all concerned parties – without worrying about whether the number is right, or whose data is better. It will all be consistent.

Robert W. Young
Product Manager – Commercial Applications

March 2008 Update

In the news...

• Williams and TransCanada Propose New Natural Gas Pipeline for Western U.S. (3/13/2008) Williams and TransCanada may develop a new natural gas transmission pipeline - Sunstone Pipeline - to transport gas from the Rockies to markets in the western US. The proposed 618-mile, 42-inch pipeline will have a capacity of up to 1.2 billion cubic feet per day. If built, the Sunstone Pipeline will parallel the existing Williams Northwest Pipeline system. That pipeline runs from its Opal hub in Wyoming to Stanfield, Oregon and interconnects with TransCanada's Gas Transmission Northwest (GTN). The Sunstone project has the option to serve both Northwest and GTN markets. Additional benefits of the Sunstone Pipeline include: construction of fewer miles of pipeline along an existing utility corridor, favorable rates due to efficiencies from existing operations and infrastructure, and increased access to markets in Nevada, California and Pacific Northwest. The project, if approved, is scheduled to begin service in 2011. [More here]

• Gas Explosion Injures Six, One Missing (3/12/2008) . ....... A March 12 natural gas explosion 15 miles off the coast of Marsh Island, Louisiana injured six crew members of a pipeline maintenance vessel and left another missing. The maintenance vessel Jillian Morrison was clearing gas from a closed section of pipeline when the explosion occurred. The pipeline owner, ANR Pipeline Co. (a subsidiary of TransCanada), said its pipeline system and natural gas supplies to customers were not affected by the blast. However, El Paso Corp's Tennessee gas pipeline was affected leading the company to declare force majeure because it was unable to meet contractual supply obligations. Three crew members have been released from the hospital while three more were listed in serious condition at the hospital in Lafayette, Louisiana. The Coast Guard is continuing its search for the missing crew member. A cause for the explosion has not been determined. [More here]

• Exxon Flexes, Critiques Gas Line (3/10/2008). ............ Exxon Mobil Corp. submitted a 14-page document criticizing a TransCanada bid to build a North Slope natural gas pipeline. TransCanada is the only bidder approved by Alaska Gov. Sarah Palin for the project. Exxon said the 1,715-mile, $26 billion pipeline proposal is seeking too much profit and seeks to send the Alaskan gas only into TransCanada's Alberta pipeline network. The higher shipping rates TransCanada expects to charge could discourage drillers from locating and developing new gas supplies. However, the proposal also offers to share ownership of the pipeline and Exxon expects to be a co-owner with a stake equal to its share of gas flowing through the pipeline. [More here]

• Alaska Mulls Pipeline Options If Big Oil Balks (3/6/2008) Alaska and the U.S. Federal government are considering other options in the event Exxon Mobil, ConocoPhillips and BP Plc refuse to back Gov. Sarah Palin's approval of the TransCanada Corp. pipeline proposal. The natural gas and oil producers are wary of working with Canada's largest pipeline firm. Gov. Palin has threatened to revoke leases for oil fields including Prudhoe Bay if the companies do not participate in her process. Alaska is considering the potential for an alternative liquefied natural gas project along with the TransCanada proposal. The U.S. Department of Energy is evaluating other pipeline construction proposals as well. Congress is also eager to tap into the 35 trillion cubic feet of North Slope gas reserves to meet U.S. demand, according to Drue Pearce, federal co-ordinator for Alaska Natural Gas Transportation Projects. "(Lawmakers have) said: 'Alaska, you need to move because, if we have to, eventually, Congress will step in and make sure this pipeline gets built'," Pearce said. [More here]

• Widening Investigation May Present A Hurdle For Gas Pipeline Project (3/6/2008) Federal prosecutors expanded their Alaska corruption investigation into the executive branch of government after Jim Clark, chief of staff for former Gov. Frank Murkowski, pleaded guilty to a felony conspiracy charge in connection with illegal campaign contributions. Around 10 percent of the 2006 Alaskan Legislature have been implicated in corrupt activity. "This bleed over into another branch of government ... is very, very unfortunate in terms of Alaska's reputation," Gov. Sarah Palin said. She also said past negotiations with oil companies to get a natural gas pipeline built took place behind closed doors. It now appears VECO Corp. was making illegal campaign contributions to the state's lead negotiator to the governor. None of the North Slope oil producers applied for the pipeline license, nor did a respected pipeline company, Mid-American Energy, citing the fallout from the corruption investigation. The governor said her administration is working to set a new standard for ethical and open government. [More here]

• Fatal US-Canada Pipeline Fire Causes Over $3 Spike In Oil Prices (3/3/2008) Fire broke out at an Enbridge Energy pipeline in Northern Minnesota. Two workers repairing the pipeline were killed by the fire. The pipeline carries crude oil from Canada to the U.S. Midwest. In total, five pipelines will have to be shutdown until repairs can be made. Enbridge spokeswoman - Denise Hamsher - said the company stored oil in stations along the line and at refineries thus avoiding disruptions in supply to the Midwest for several day. However, oil prices rose more than $3 on uncertainty of how the pipelines closure would affect supplies. [More here]

• Enbridge Inc. Gets Approval For Southern Lights Diluents Pipeline (2/27/2008) On February 20 Enbridge Inc. announced it received approval from the National Energy Board (NEB) for its Southern Lights pipeline that will transport diluents, gasoline-like liquids, from U.S. refineries to Edmonton, Alberta. The Calgary-based company plans to build a new section of 20-inch pipeline from Chicago, Illinois to Clearbrook, Minnesota and reverse the flow of its Line 13, that currently transports light synthetic crude oil from Edmonton to Clearbrook. In total, the project involves laying 1,085 kilometers of 16-inch pipe and will run through Illinois, Wisconsin, Minnesota, North Dakota, Manitoba, Saskatchewan and Alberta. It will have a capacity of 180,000 barrels-per-day and is expected to cost $2.2 billion. [More here]

• Enbridge Receives NEB Approval On Alberta Clipper Expansion Project (2/22/2008) The National Energy Board (NEB) approved Enbridge's application for the Alberta Clipper Expansion Project. The project involves the construction of a new 1,000-mile, 36-inch crude oil pipeline from Hardisty, Alberta to Superior, Wisconsin. Once completed the pipeline's initial capacity will be 450,000 barrels-per-day (bpd) which can be increased up to 800,000 bpd. It is scheduled to be in service by mid-2010 pending U.S. regulatory approvals.... [More here]

• TransCanada Plots Next Big Oil Line To Gulf Coast (2/21/2008) TransCanada is plotting an even bigger pipeline than its Keystone project to transport Canadian crude to the U.S. Gulf coast. The company is considering a direct route to the huge refining hub in the Gulf. The other option is to send Canadian oil sands crude to more distant refineries via its under-used natural gas pipelines for part of the route similar to its Keystone project. "But if the demand for transportation materializes more quickly, we would look at building a direct line," TransCanada CEO Hal Kvisle told investors at a conference in Whistler, British Columbia. "Either way, the discussions are well advanced and this is one of the future projects that we will be bringing forward here in the months ahead," he said in his Webcast speech. The 2,148-mile, $5.2 billion Keystone pipeline starts construction in the next few months. It is scheduled to start service in 2009 or 2010 and can transport 590,000 barrels of oil per day. The Gulf coast currently demands seven million barrels of crude a day. Canadian crude production could increase by one to two million barrels per day in the next decade, according to Kvisle. [More here]

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]

January 2008 Update

In the news...

• Energy Services plans two West Virginia acquisitions (1/24/2008) Energy Services Acquisition Corp. announced plans to acquire S.T. Pipeline Inc. and GasSearch Drilling Services Corp. The total cost for the purchases is $23.5 million paid in cash and stock. S.T. Pipeline located in Clendenin, WV, mainly installs and repairs pipelines for the oil and gas industries while GasSearch Drilling Services of Parkersburg, WV, drills and services oil and gas wells. [More here]

• Enbridge Energy Partners Completes Phase 5 Expansion Of North Dakota Crude Oil System (1/24/2008) Enbridge Energy Partners, L.P. has recently completed the Phase 5 expansion of its North Dakota crude oil system, bringing the system's capacity up to 110,000 barrels per day (bpd). The $78 million project added a 52-mile pipeline segment, 10 new or upgraded pump stations and additional tank storage. A planned project "Phase 6 Expansion" will add another 51,000 bpd of capacity by 2010. [More here]

• TransCanada Says ConocoPhillips Has Acquired 50 Percent Of Keystone Pipeline (1/22/2008) TransCanada Corp. announced that ConocoPhillips acquired a 50 percent ownership stake for a proposed oil pipeline that will be capable of delivering 590,000 barrels per day of Canadian crude to U.S. refineries. Construction on the 3,456-kilometer (2,148-mile) pipeline is scheduled to start this spring and be finished late 2009. Once the $5.2 billion project is completed it will serve markets in Patoka, IL, and Cushing, OK by crossing North Dakota, South Dakota, Nebraska, Kansas and Missouri. The Canadian government has approved the proposed route through Canada. A presidential permit authorizing construction and operation of facilities at the U.S-Canada border crossing and construction permits from the South Dakota Public Utilities Commission are needed before the project can begin..... . [More here]

• GAO: US Should Improve Oil Product Supply System (1/22/2008) The US Government Accountability Office warned in a January 18 report the US petroleum product is constrained in key states and will continue as such without future investment. "Industry and federal agency officials report a systemic lack of pipeline capacity in the supply infrastructure system in key states including Arizona, California, Colorado, and Nevada, and note the existing supply infrastructure is insufficient to carry the commensurate volume of petroleum products and crude oil needed to meet growing demand there," according to the GAO report. It went on to say many private sector plans to expand domestic oil and product supply distribution system, if implemented quickly, will significantly relieve stresses on the system. "However, a complex permitting and siting process involving as many as 11 federal agencies and numerous state and local stakeholders has slowed or impeded the expansion and construction of new pipelines," it said. The report included several recommendations to improve the situation, among them studying to determine if the oil and product distribution system is adequate and if a lead agency could be assigned to coordinate infrastructure construction permitting. [More here]

• EnCana Plans 22-mile Colorado Gas Pipeline (1/21/2008) EnCana Oil & Gas filed a right-of-way application to construct a 22-mile natural gas pipeline with the US Bureau of Land Management (BLM) in Grand Junction, CO. The proposed 32-inch line in the Colbran and Plateua Valley area will transport up to 650 million cubic feet of field-grade gas, according to BLM. Around 93% of the proposed route will be at the edge of existing pipeline or road corridors, starting on Hayes Mesa approximately 5 miles west of Colbran and ending at EnCana's Orchard Unit compressor 6 miles northeast of De Beque, Colorado BLM said. [More here]

• Pipeline Executives To Review Billions In New Construction Plans At P&GJ's Pipeline Opportunities Conference (1/21/2008) Over 20 leading energy executives from North and South America will attend the 4th Annual Pipeline Opportunities Conference on March 25 in Houston to provide and discuss the latest information on planned oil and gas pipeline construction valued at billions of dollars. Conference chairman Jeff Share, Editor of Pipeline & Gas Journal, said "Pipeliners are unanimous about the business opportunities in North America as petroleum supplies seek to keep up with demand. Yet with a teetering economy that threatens to dry up badly needed investment capital, workforce and equipment shortages, increased regulatory mandates and traditional public opposition to new infrastructure projects or expansions, the challenges are also equal to the opportunities." Guest speakers at the conference include Norm Szydlowski, president and CEO of Colonial Pipeline Co., Mike Mears, Senior VP of Magellan, consultant Brad Kamph, pipeline contractor David Sheehan, Bechtel executive Jerry Fee and numerous other executives from Petrobras, Enbridge Pipelines, El Paso Corp., Spectra Energy, Energy Transfer Partners, Kern River, Kinder Morgan, Southern Union Co and possibly Alaska Gov. Sarah Palin. [More here]

• Rockies Express Pipeline Begins Full Interim Service On REX-West (1/14/2008) Rockies Express Pipeline LLC announced interim service on 500 miles of its Rockies Express-West (REX-West) pipeline with a natural gas capacity of about 1.4 billion cubic feet (Bcf) per day starting January 12 from Weld County, CO to the delivery point in Brown County, KS. The 42-inch diameter section also includes delivery points to Kinder Morgan Interstate Gas Transmission, Northern Natural Gas Company and Natural Gas Pipeline Company of America. Another 213-mile section of REX-West continues eastward to Audrain County, Mo., and is expected to be in service by February. Upon completion capacity will increase to about 1.5 Bcf per day. [More here]

• Carl T. Johnson Begins Role As New Pipeline and Hazardous Materials Safety Administration Administrator (1/8/2008) Carl T. Johnson was sworn in as the Administrator of the Pipeline and Hazardous Materials Safety Administration (PHMSA). Nominated for the post by President Bush on October 30 and confirmed by the U.S. Senate on December 19 Mr. Johnson is the second person to hold the position. U.S. Transportation Secretary Mary E. Peters said, "Carl will use his vast experience to make sure that the movement of energy and hazardous materials remains safe, efficient and reliable." Johnson previously served as president of the Compressed Gas Association and as special assistant to Representative Amory Houghton of New York. [More here]

• Farmers, Energy Interests Clash Over Pipeline Plan (1/6/2008) A group of farmers and landowners in Merna, Illinois want to stop construction of Enbridge Inc.'s approximately 170-mile section of pipeline from just outside Pontiac in Livingston County to Patoka in Marion County. The $353 million piece of the company's $2.45 billion pipeline expansion would get oil to a Downstate terminal. Illinois is a key oil pipeline hub that funnels oil from Oklahoma and Canada to refineries in the Chicago and St. Louis areas with more than 2,100 miles of crude oil pipelines crisscrossing the state. Landowners expressed safety concerns, citing oil spills along Enbridge pipelines in Wisconsin and an explosion that killed two welders working on a pipeline in northern Minnesota in November. Both sides seek to capitalize on high oil prices with Enbridge contending Illinois consumers will save $406 million over the next two decades by hedging them against price hikes in overseas oil. Farmers counter that the corn produced on their land for the ethanol market is already fighting foreign energy dependence. If landowners reject Enbridge's offer of $6,000 per affected acre, the company wants, only as a last resort, the power of eminent domain to seize the land for public good. [More here]

• Only One Applicant, TransCanada Corp., Meets All of Alaska's Requirements For Gas Line (1/4/2008) TransCanada Alaska Co., LLC/Foothills Pipelines, Ltd., a subsidiary of Calgary-based TransCanada Corp., was the only applicant out of five that met Alaska's state requirements under the Alaska Gasline Inducement Act (AGIA) for the exclusive right to build a pipeline to transport North Slope gas to market. "We have long stated that it only takes one good application. We're thrilled to have a project sponsor willing to build a pipeline on terms that benefit all Alaskans," Alaskan Gov. Sarah Palin said during a press conference in Anchorage. If built, the pipeline would deliver 4.5 billion cubic feet of natural gas a day from a proved gas reserve in the North Slope estimated to be at least 35 trillion cubic feet. [More here]

November 2007 Update

In the news...

• National Fuel Proposes $700 Million Gas Pipeline (11/12/07) National Fuel Gas Co. proposes to build a 324-mile pipeline extending from southeastern Ohio to Corning, NY at a cost between $630 million and $725 million. National Fuel, currently constructing a 77-mile extension to its Empire State pipeline between Victor, NY and Corning, calls the proposed pipeline the "West to East" project. The pipeline would link the Rockies Express pipeline with the Millennium Pipeline in Corning and could carry 550 to 750 million cubic feet of gas each day. Construction of the proposed project is contingent on getting firm commitments from customers for the bulk of the pipeline's capacity. [More here]

• Work On N.B. Pipeline Likely To Start Soon (11/9/2007) Emra Brunswick Pipeline Co. will not have to wait another 60 days to begin pre-construction work on its $400 million gas pipeline project. The National Energy Board (NEB) of Canada initially turned down an application to start work because Emra failed to provide all the required information. A company spokesman stated the necessary information has now been submitted to the board. NEB spokeswoman Carole Leger-Kubeczek said work on the 145-kilometer pipeline near Saint John, New Brunswick can begin after the board reviewed the new information and found it to be satisfactory. [More here]

• Tammany Pipeline Repairs Continue (11/9/2007) ....... Repair work continues on the Tammany Oil & Gas pipeline that ruptured about four miles offshore from McFaddin Beach, Texas on November 5. Two leaks released about 2,000 gallons of crude oil into the Gulf of Mexico. Divers have removed a three-inch thick concrete covering surrounding the southern leak and will install a pipe clamp. Once finished, divers will do a similar repair on the northern leak. In the meantime, the Texas General Land Office and MSU Port Arthur are conducting helicopter over-flights to monitor discharged oil movement and direct skimming operations. [More here]

• Man Gets 30 Years In Pipeline Plot (11/6/2007) ........... Michael C. Reynolds, who claimed to be trying to root out terrorists on the Internet, was sentenced to 30 years in Federal prison for plotting to help a supposed al-Qaida operative blow up U.S. oil pipelines and refineries. He was arrested after he tried to meet a purported al-Qaida contact (actually a Conrad, MT judge working for the FBI) 25 miles from Pocatello, Idaho. Prosecutors said Reynolds wanted to work with al-Qaida to target the Williams natural gas refinery, Transcontinental Pipeline and a Standard Oil refinery that no longer exists. At the meeting in Idaho, Reynolds expected to get $40,000 to finance the plot. [More here]

• Battle Brewing Over Proposed Oil Pipeline (11/6/2007) ..... A group of First Nations leaders in Manitoba is seeking to force gas and oil distributor, Enbridge Inc., to pay them for building a pipeline through traditional territory. Enbridge's pipeline project - the Alberta Clipper - on its way from Alberta to Wisconsin would pass through a southern part of Manitoba. Roseau River Chief Terry Nelson, a First Nations leader told CBC News, "Every municipality gets a benefit from the pipeline coming through the municipality — they get it without a fight because they are recognized as beneficiaries to the pipeline — except the indigenous people". He has sought unsuccessfully to convince the Canadian federal government to refuse approving the pipeline unless First Nations are compensated. Industry Canada officials said the National Energy Board will examine all issues related to the Alberta Clipper. An Enbridge spokesperson would not comment while hearings are underway. [More here]

• TransCanada: Cost Of Keystone Pipeline Almost Double Original Estimates (11/5/2007) According to TransCanada, its proposed Keystone pipeline will now cost $5.2 billion or almost twice its original estimate of $2.8 billion. The pipeline extending 2,148 miles from Hardisty, Alberta to Cushing, OK as well as Wood River and Patoka, IL, is expected to transport 590,000 barrels of oil per day by 2010. TransCanada said design changes and inflation related to higher prices in steel and labor are the reason for the cost escalation, according to the Globe and Mail. The Canadian Energy and Paperworkers Union oppose the pipeline project claiming 18,000 Canadian jobs will be lost to the U.S. if it is completed. Operations are expected to begin in 2009, transporting 435,000 barrels per day to Illinois. [More here]

• Enbridge Energy Partners Closes Sale Of Kansas Pipeline System (11/1/2007) Enbridge Energy Partners, L.P. has sold its interstate natural gas transmission system, also known as the Kansas Pipeline System, to Quest Midstream Partners, L.P. a subsidiary of Quest Resource Corporation for $133 million. [More here]

• Explosion In Mexico Gas Pipeline (10/31/2007) .................. In the city of Huimanguillo, located in the Gulf coast state of Tabasco, Mexico, a Pemex natural gas pipeline exploded causing at least one town to be evacuated. No injuries or deaths were reported. Workers immediately shut down the 16-inch pipeline and burned off excess gas trapped in ducts. Pemex is also trying to contain oil leaking from a land pipeline that cracked on October 24. An estimated 10,000 barrels of oil have spilled into the Jaltepec and Coatzacoalcos rivers in the Gulf state of Veracruz. Despite containment efforts, oil has reached coastal areas. [More here]

• TransCanada May Take Larger Role In Mackenzie Project (10/31/2007) TransCanada Corp. is considering building and operating by itself the $7 billion main-line portion of the $16.2 billion Mackenzie Gas Project. Although the project faces many hurdles including escalating costs, long regulatory delays and aboriginal community opposition, TransCanada's CEO Hal Kvisle said the project is still viable. “I think we look forward a little more optimistically because I don’t think anyone would be more aware than us of the challenges of sustaining gas production in Alberta,” he said. Other potential stakeholders including Imperial Oil, Conoco Phillips, Exxon Mobile Corp. and Royal Dutch Shell PLC will not make any final investment decisions on the project until receiving regulatory approval from the National Energy Board of Canada expected late next year. [More here]

• Enbridge Energy Partners Proceeds With Second North Dakota Pipeline System Expansion (10/29/2007) Enbridge Energy Partners, L.P. announced it will expand the Enbridge North Dakota Pipeline System adding up to 51,000 barrels per day (bpd) for a total system capacity of 161,00 bpd, if approved by the U.S. Federal Energy Regulatory Commission. Costing an estimated $150 million, the expansion will add 40,000 bpd of capacity from the western end of the system to Minot, ND and 51,000 bpd of capacity from Minot to Clearbrook, MN. This new expansion project is expected to be in service late 2009 and is in addition to the existing 30,000 bpd expansion project under construction with a targeted completion date at the end of 2007. [More here]

• Willbros Wins Five Contracts (10/26/2007) ................ Willbros Group Inc. said it has been awarded approximately $170 million in domestic and Canadian construction contracts. The five contracts include building two sections of the natural gas pipeline looping sections for TransCanada Corp., a Pipeline Alley tie-in connection for Kinder Morgan, projects for Cheniere Energy Inc., and new pump station and modification work for Marathon Oil Company. [More here]

• Alaska Gets Tough On Big Oil (10/17/2007) .................. Governor Sarah Palin was elected by Alaskans on a simple platform - get a natural gas pipeline built on Alaska's terms. Previous governor, Frank Murkowski, negotiated a deal with North Slope producers - Exxon Mobile, BP and Conoco Phillips - to construct a pipeline from Prudhoe Bay to the continental U.S. in exchange for 5% reduction in their taxes. The new governor does not think these producers need inducements since they each stand to gross up to $1 billion a year at current prices. Furthermore, Governor Palin thinks that the threat of having to pay fees to an organization outside the group may prod one of the three to bid. However, her plan may not work. So far, none of the big oil companies have submitted a bid that is due at the end of November. Several pipeline builders could bid on the project including Enbridge, MidAmerica and TransCanada. But these companies are reluctant to build it without commitments by the oil companies to use their pipeline. If there are no bids, Governor Palin may sue the producers or have the state finance the pipeline, further adding to at least a seven-year build time. With rising natural gas prices and disruptions in the Gulf by hurricanes such as Katrina, the rest of the U.S. need the pipeline and can't afford to wait. [More here]

Is the Natural Gas Market Ready for Hourly Nominations?

Marketers, traders, and power generators would like the natural gas market to be as fluid as the electric market. Pipeline companies trying to efficiently manage their assets want to assure that if markets pull all their gas in a few hours per day, that they keep the integrity of their pipelines safe, as well as collect money from those using their pipelines in such a manner.

The problem in moving the natural gas market towards the electric market lies in the fact that electricity literally moves at the flick of a switch, while natural gas takes a bit of time to move from the producing fields to the end use markets.

Frankly, power generators don’t necessarily care what it takes to get the gas there; they just want it available when they need it. Pipelines are often more interested in selling capacity and maintaining steady throughput and linepack.

To manage this hourly, transactions will need to be scheduled on an hourly or series of hourly basis. This would result in up to twenty-four scheduling cycles in which the pipeline would need to assign capacity and make cuts each hour. Great in theory, but not realistic from a scheduling and accounting view.

The logical step is to continue scheduling under the current cycles and utilize hourly nominations for flow profile calculations so that pipelines can manage their assets – and maybe even come up with a simple billing mechanism that does not call for massive manual spreadsheets, or re-writes of existing business systems.

Until all the camps come together and put themselves in each others shoes, a solution determined by the regulatory agencies trying to mediate the selfish concerns of the different camps will result. That could lead to disastrous results – or at least leaving no one happy.

Robert Young
Product Manager – Commercial Applications