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Alaska gas pipeline moves closer to construction

21st November 2012

The Alaska gas pipeline is a proposal to transport natural gas from the Alaska North Slope natural gas reserves to the US Midwest

Alaska gas pipeline moves closer to construction
Canadian Arctic Gas Pipeline – a consortium of large oil companies including Shell, Exxon, and TransCanada – proposed a route from Alaska's Prudhoe Bay across northern Yukon to the Mackenzie Delta, and then south through the Mackenzie Valley to Alberta

The project is under development by TransCanada and ExxonMobil.  TransCanada has secured state seed money and a license from the state of Alaska to build and operate a pipeline, but does not yet have federal approvals needed to start construction.

The roots of the Alaska Gas Pipeline can be traced back to the large natural gas reserves that were discovered in Prudhoe Bay way back in 1967. It is not a new idea, there has long been talk of a pipeline and this peaked during the 1973 OPEC oil embargo and several companies came out in support  of large pipeline projects. Canadian Arctic Gas Pipeline – a consortium of large oil companies including Shell, Exxon, and TransCanada – proposed  a route from Alaska's Prudhoe Bay across northern Yukon to the Mackenzie Delta, and then south through the Mackenzie Valley to Alberta. In addition, the Foothills Pipeline consortium pursued a competing Mackenzie Valley Pipeline, starting at the Mackenzie Delta and also running along the river valley to Alberta. Either proposal required the approval of the Canadian government which was not forthcoming.

All-Alaskan Pipeline

On July 3, 2007, the Governor of Alaska Sarah Palin announced that the State of Alaska was ready to receive applications to build a pipeline within the framework of the Alaska Gasline Inducement Act (AGIA).  On January 4, 2008, a proposal by TransCanada was selected. Four other proposals were submitted: By Sinopec, AEnergia, the AGPA, which proposed a liquefied natural gas project, and the Alaska Natural Gas Development Authority.

In early 2008, Palin announced that the Canadian company TransCanada Corp was the sole AGIA-compliant applicant and in late Summer of that year she signed a bill into law giving the state of Alaska authority to award TransCanada USD500m in seed money and a license to build and operate the USD26bn pipeline to transport natural gas from the North Slope to the Lower 48, through Canada. The license is not a construction contract, and federal energy regulators must approve the project before it can go forward.

The pipeline proposed by TransCanada would run 1,715 miles (2,760 km) from the North Slope to Calgary in Alberta. It is expected to cost USD26bn billion and to be operational by 2018.

Outside of the AGIA process, authorities were evaluating a separate proposal issued by Denali – The Alaska Gas Pipeline, a joint venture of ConocoPhillips and BP. ExxonMobil was invited to participate in the project. Also Enbridge, Royal Dutch Shell and Gazprom had shown interest to join this project. However, mid-2011 Denali announced that it ends developing the project due lack of interest from potential costumers.

Possible routes include the Alaska route, or southern route, a pipeline along the Alaska Highway. A shorter alternative route, which was considered in the 1970s, links Prudhoe Bay natural gas through Mackenzie River Valley. The pipeline will be built only if Canadian authorities can strike a deal with First Nations whose lands are in the pipeline route, who are accusing Palin and other pipeline proponents of treating them with disrespect by not consulting with them.

“For decades Alaskans have diligently tried to secure the four “Ps” for commercializing Alaska North Slope natural gas: a project to unlock that gas, the permits to build it, participants to fill it, and the perseverance to see all this through,” Kurt Gibson, director of the Alaska Gas Pipeline Project Office, says. “Under the Alaska Gasline Inducement Act (AGIA) the ball advanced considerably with TransCanada and ExxonMobil forming the Alaska Pipeline Project (APP).  APP reached the important milestone of moving a gasline into the design and permitting process.  It identified significant commercial interest in the project through the first-ever open season for North Slope gas.  These achievements were unprecedented in Alaska’s 30-plus year effort to commercialise North Slope natural gas.

“Advances in shale gas technology changed the math on natural gas supply and demand in the lower 48.  Due to increased gas supplies and low prices APP’s efforts to build an overland pipeline to Alberta remains challenged.

“As director of the Gas Pipeline Project Office (GPPO) I have had regular contact with the AGDC’s director, Dan Fauske, and his staff.  AGDC holds a 604-mile state right-of-way and its project is advancing through the EIS process.  Should the APP project be developed the in-state line could easily be tailored as a spur line.  These are complimentary, not competing efforts, and together raise our collective confidence that a project will be built.

“The commissioners’ approval letter requires that APP and the Producers complete their project selection and provide a preliminary work schedule by the end of September.  The letter also directed APP to conduct a public solicitation of interest in an LNG project by the end of December.  This solicitation must meet the requirements of the AGIA license “and include all potential market participants, including but not limited to North Slope producers, explorers, LNG terminal developers, and entities seeking to import Alaska gas into Asian and other markets.

“While this project remains a challenge, there are a number of developments that should make Alaskans feel hopeful.  Going back to my four “Ps,” we are awaiting the eminent unveiling of a new project concept.  When the time comes we will be able to permit this project.  We have the perseverance to see this process through.  We also have the participation of the ANS producers.  The critical parties that are needed to ensure commercial success are sitting at the table – something that AGIA was designed to accomplish.  As a state we are in a very good place.”

The pipeline will be constructed of grade API X80 steel pipe with a minimum nominal wall thickness of 0.932 inch. North of the Brooks Range, the natural gas in the pipeline will be cooled to below freezing to minimise impact on the continuous permafrost. For stations located south of the Brooks Range, seasonal variation in station discharge gas temperature will range from about 25°F in the winter to about 45°F in the summer, resulting in an annual average temperature between 30°F to 35°F.

In addition to the proposed pipelines, the APP pipeline is expected to include the installation and operation of eight compressor stations, two meter stations, fifty-two Main Line Block Valves (MLBV), five launchers, four receivers, and a minimum of five potential intermediate gas delivery points in Alaska. Of these, one meter station, four MLBVs, one launcher, and one receiver will be associated with the PTGP; the remainder will be located along the Alaska Mainline.

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