Gas producers await fate of Alaska pipeline
West at risk
Jon Harding, Financial Post Published: Tuesday, January 08, 2008
CALGARY -- Almost half the natural gas pipeline capacity leaving Alberta today for markets across the continent could sit empty by 2018 unless an Alaska pipeline gets built and connects to the Alberta hub, says a new study by the Canadian Energy Research Institute.
Gas producers in the West would face higher tolls, further eroding the economics of Western Canada's high-cost natural gas industry, and pipeline companies would be left operating inefficient pipelines, said the study's author, Peter Howard.
"All things being equal, if the flows in the pipelines continued to decline then at some point in time it would be a concern for the pipeline companies, and for the producers indirectly," Mr. Howard, a senior research director with the Calgary-based energy research group, said.
However, Mr. Howard said such a scenario would likely have little impact on consumers in Ontario, California and other end points of the five main pipeline fingers that leave Alberta. Demand for gas at those points would end up being met by sources from outside Western Canada, he said.
The five pipeline systems leaving Alberta today, the largest of which is owned by TransCanada Corp., have a daily export capacity of 14.98 billion cubic feet. Their average utilization in 2005 was 83% but CERI's study says utilization could decline to 74% by 2012 and to 58% by 2018.
Unused takeaway capacity would increase from 2.5 billion cubic feet in 2005 to 3.5 billion in 2012 and to almost 7 billion cubic feet a day by 2018, Mr. Howard said.
New gas supplies from coal-bed methane development, liquefied natural gas imports from the British Columbia coast and even the Mackenzie Gas Project from Canada's Arctic will not be enough to offset declines in Western Canada's conventional production.
As well, CERI predicts demand for natural gas within Alberta from the oilsands industry could rise from one billion cubic feet a day today to 6 billion cubic feet a day, compounding the dearth of gas available for export.
The Alaska pipeline, a US$26-billion project that TransCanada Corp. hopes to build and whose plan was endorsed last week by the Alaska government, would move between 4.5 billion cubic feet and 6 billion cubic feet of natural gas a day between Alaska's North Slope and Boundary Lake, Alta., where it would feed into the existing Alberta system.
The CERI study makes a strong case that the most efficient and least expensive way for Alaska North Slope's 35 trillion cubic feet of stranded gas to reach markets across North America is through Alberta and beyond within TransCanada's pipeline system.
The CERI study says transporting Alaska gas beyond Alberta to Chicago through TransCanada's existring systems would require about $1.8-billion worth of new pipe and compression and the average transportation tariff would be $1.30 per thousand cubic foot.
It projected that moving Alaska gas to Chicago through Alberta and beyond on the Alliance system - a TransCanada competitor - would require an almost $14-billion investment and the combined average tariff would be $1.61 per thousands cubic foot.
