Tue, Feb 16, 2010 page5

• FEATURE : Alaska wooing PRC as potential customer for gas

  PIPELINE DREAMS China, already a leading market for Alaskan products, could become a major investor in or export market for its natural gas or byproducts

  • AP
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  Alaska officials are looking to China and what some believe will be that country’s strong demand for natural gas to help the state advance its long-held pipeline dreams.

  Alaska Governor Sean Parnell has invited an official with China’s National Energy Administration and others to visit Alaska, following up on a trade mission Lieutenant-Governor Craig Campbell helped lead to China in December.

  Campbell returned from that trip believing the rapidly developing nation, already a leading export market for such Alaska products as seafood, zinc and lead ore, could also become a major investor in or export market for Alaska natural gas or its byproducts.

  The potential for Alaska is huge, said Alaska Natural Gas Development Authority chief executive Harold Heinze, who was with Campbell on the trip.

  Heinze said he saw several possibilities for China, from building a plant to convert ethane to pellets that would be used in manufacturing to signing on with a major natural gas pipeline project. Ethane is a component for plastics that he says is found in the Prudhoe Bay region.

  “One thing you look for in a partner is, do they have money and do they have more money than you. And these guys have money,” he said, adding: “They’re major players in the world.”

  In theory, if the interest and money are there, that could also spur progress on a pipeline that many Alaskans have long looked to for new jobs, reliable energy and as a source for more state revenue amid projections of slumping oil production.

  But there are plenty of uncertainties, from permitting and pricing — how gas holds up against other energy sources — to what China’s true long-term demands for gas will be over alternatives like coal, and the level of competition Alaska would face from other producers to meet the gas demand.

  And there are the various pipeline options and plans, each with diehard constituencies and questions about their viability.

  Estimates released last month by the companies working with the state to advance a major line put the project costs at US$20 billion to US$41 billion, depending on the route.

  One route, the cheaper option, estimated at US$20 billion to US$26 billion, would run from the harsh North Slope to Valdez, Alaska, where gas would be liquefied at a facility that another entity would build and then shipped elsewhere, possibly overseas. The plant cost isn’t included in the estimates.

  The costlier option envisions a pipeline going from the North Slope to Canada, where gas could move on existing systems to North American markets.

  But there have been numerous other proposals through the years to move North Slope gas, even a bullet line to move the gas to the most populated part of the state, southcentral Alaska.

  “The Chinese may, because they’re interested in resources, they may be able to do things and invest in things that don’t look economic in market terms,” said James Jensen, a consultant in natural gas economics.

  “In fact, if the Chinese said, ‘Gee, if we could get this thing going and we could tie up a certain amount of American gas for our own use,’ they might do something that I wouldn’t think would be economic,” he said. “But they might do it.”

  Officials with TransCanada Corp, based in Calgary, Alberta, and Irving, Texas-based Exxon Mobil Corp, say the project is economically viable and hope to move toward an “open season,” when they can court gas producers and try to secure commitments for shipping deals, by May.

  The companies, in a recent filing with federal regulators, estimated 991 billion cubic meters of proven gas reserves on the North Slope.

  Through a process in which TransCanada beat out applicants including a Chinese company several years ago, the state agreed to reimburse up to US$500 million of the eligible costs of the project.

  A TransCanada spokeswoman declined comment on whether there had been interest from China on the project, saying: “All discussions with individual customers are confidential and we would not be able to discuss any individual details as a result of that.”

  A rival project by Britain’s BP PLC and Houston-based ConocoPhillips is also moving ahead.

  Campbell said he was not advocating any specific project, but he’d like Chinese officials to visit “earlier, rather than later.”

  They have indicated a “huge demand,” for natural gas, he said, and Alaska wants a market.
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