Tough competition expected among new LNG projects
March 4, 2014
Bill White and Office of the Federal Coordinator, under leadership of Larry Persily, provide a useful service to government and industry with scholarly essays on issues and facts related to disposition of Alaska North Slope Gas. In this piece, White carefully analyzes various aspects of Alaska LNG competition.
HOUSTON — Too many potential liquefied natural gas export projects are chasing the expected strong growth in Asian gas demand over the next 15 years, a consensus of speakers said at a recent LNG conference.
"There will be a lot of North American projects still waiting in 2030," predicted Daryl Houghton, LNG consulting manager with Poten & Partners, a global energy consultancy. LNG plant development has always gone through busts, booms and "projects waiting in the queue."
The LNG world has plenty of potential suppliers post-2020, agreed Robert D. Stibolt, senior managing director at Galway Group, an energy advisory firm with offices in Houston and Singapore. "It's just a question of who will come on and who will be deferred."
Houghton and Stibolt spoke at the Platts 13th Annual Liquefied Natural Gas conference Feb. 20-21 in Houston. Conference topics ranged from the status of proposed North American export projects and their possible impact on global gas pricing to projected demand from different regions of the world.
But some of the key interplay among presenters during the two days sprang from a comment by the conference's first speaker:
Asia-Pacific annual LNG demand will grow by about 165 million to 175 million metric tons by 2025 — roughly double today's demand, said Asish Mohanty, senior analyst for global LNG research at Wood Mackenzie. That new demand — averaging about 23 billion cubic feet of natural gas a day — could require construction of a dozen or more new large-scale LNG export terminals over the next decade.
But Mohanty said new LNG projects under discussion — totaling 555 million metric tons per year in potential capacity — could fill that forecasted demand three times over. (He noted some are projects actually on the drawing boards and some are "projects" more at the dream stage.)
Some speakers who followed weighed in on the Wood Mackenzie forecast with their own outlooks.
Houghton of Poten & Partners said 370 mtpa in projects are vying to provide 130 mtpa in new LNG supply by 2030 that today's existing or under-construction plants can't meet.
Ed Ridzwan, assistant marketing director for Qatargas Operating Co., said an additional 155 mtpa of LNG capacity not yet sanctioned for construction must be built to meet forecasted demand for 2025. That is more than 20 bcf a day of new supply.
The proposed— sponsored by ExxonMobil, BP, ConocoPhillips, TransCanada and the state of Alaska — would produce 15 to 18 mtpa.
Stibolt of Galway, speaking toward the conference's end, came in as voice of calm on whether an LNG supply glut looms for the 2020s. Projects that aren't needed won't be built, he said simply. Supply and demand will balance. That is the LNG industry's history. That will continue to be its story, he said.
Demand is tricky to predict, Stibolt noted. Variables include prices, coal- and nuclear-power plant retirements, and technology advances on both the supply and demand sides.
But Stibolt believes global LNG demand will be strong enough to support North American exports.
He didn't think a glut of U.S. exports, with prices tied to generally lower U.S. natural gas prices, would end the era of generally higher oil-linked LNG prices in Asia. But Stibolt said the actual link — called a "slope" — in the oil-pricing formula would angle down to a lower level as both the U.S. Henry Hub index and United Kingdom's National Balancing Point index get incorporated into prices in some Asian contracts.
WILL LIQUIDITY MATTER?
Another factor in the 2020s could help ease high oil-linked prices. The decade likely will see new LNG supplies sail to market from the United States, Canada, Russia, East Africa, Australia and elsewhere. At the same time, consumption likely will be blossoming in such hungry economies as China, India, Singapore, Thailand, Indonesia, Malaysia, the Middle East and South America.
With more suppliers and more buyers in the 2020s, the gas market will have more options for its players, or as economists say: More liquidity. That should result in lower prices, Stibolt said.
Two days before the Platts conference began, a Houston-based economist at Rice University's Baker Institute for Public Policy issued a paper that made just that point.
"As the U.S. begins to export LNG, the global market will deepen and become physically linked to the North American market, the most liquid natural gas market on the world," said Kenneth B. Medlock III in his paper "."
"As natural gas becomes an increasingly fungible commodity, which would be the case as the volume of global natural gas trade increases, the pricing paradigm of oil indexation will come under increasing pressure," he said.
Medlock noted change could happen surprisingly fast. "After all, the rise to current price levels in Asia relative to prices elsewhere happened in only six months, a fact often forgotten in the discussion about future pricing in Asia."
THE LOWER 48'S LURE
At the Platts conference, Kunio Nohata, executive officer and senior general manager of gas resources for Tokyo Gas, said the new LNG projects that could emerge in the 2020s would give his company a more diverse set of possible suppliers. That would meet an important strategic goal for Tokyo Gas. The new supply regions he named included Africa, Canada, the U.S. Lower 48 and Alaska.
Lower 48 purchases at prices tied to the Henry Hub — a South Louisiana junction of many gas trunklines — "is very interesting to Japanese buyers" because of the price-setting transparency there, Nohata said. Henry Hub pricing might not result in the lowest price in Japan, after adding liquefaction and cross-ocean shipping costs. But adding it to the pricing mix will help Japan toward its goal of establishing a transparent and liquid LNG market in Asia some day, he said.
Japanese buyers, Nohata said, also like that Lower 48 LNG purchases will be allowed to be delivered to any LNG receiving terminal — called destination flexibility. That is different from traditional LNG contracts that require cargoes to sail only between a given LNG plant and receiving terminal. Destination flexibility would allow buyers to manage their LNG portfolios better, with the goal of paying lower prices.
HOW DOES CANADA COMPETE?
Bill Gwozd, senior vice president of gas services for Calgary-based consultancy Ziff Energy, said 16 proposed projects that would export Canadian gas — 14 in British Columbia and two in Oregon — are competitive with U.S. Gulf Coast plants. The gas and liquefaction would cost more in Canada but that would be offset by a lower shipping cost because of the shorter distance to Asia, he said.
Canadian gas could get to Tokyo Bay for $10 per million Btu, he said. It's the lowest possible price, "the Walmart price," he said.
"These projects are economic." The gas reserves are ample. The technology to build seven or eight pipelines across mountains to the coast exists. "There's nothing to stop any project," Gwozd said.
Others speakers were less rah-rah about Canada.
Canadian gas will cost close to $12 to deliver to Asia, said Houghton of Poten & Partners. The pipelines will be challenging to build. The LNG plants in remote areas will be more expensive than Lower 48 plants, he said.
Mohanty of Wood Mackenzie said Canada has significant technological challenges along every step, from its tight-gas and shale-gas fields, to its pipelines (as long as 465 miles to the coast), to its LNG plants. On top of that it has First Nations issues to resolve with the British Columbia aboriginal communities. The Canadian projects will get built eventually, he said, but it's unclear when.
In addition, industry is reacting coolly to British Columbia's proposed new tax on LNG exports, which the government outlined two days before the Platts conference began. The tax would range up to 7 percent of net income after capital-cost recovery. The provincial parliament is expected to take it up this fall.
Mohanty said that among proposed projects that await final investment decisions to construct, only some in the Lower 48 and Russia seem likely to actually be producing LNG by 2020.
THE TIME IS NOW
The time is now for Lower 48 plants, he said.
Lots of upstream gas is available. Buyers are attracted to Henry Hub pricing and destination flexibility. In many cases, liquefaction trains would be add-ons to underused LNG import terminals, so the projects can be built relatively quickly. Labor supply to construct them likely is available. These plants are a good medium-term supply option for buyers.
But longer-term, it's harder to see the Lower 48 plants holding their advantages, Mohanty said.
Other projects could get built that are closer to Asia markets, including in Russia, Canada, Africa and possibly a second wave of construction in Australia. For now, Australia's reputation is tarnished by big cost-overruns and delays on the first wave: seven projects under construction today, he said.
Wood Mackenzie ranked each region relative to the others on political risk, market proximity and supply diversity for the 2020s. Canada scored good straight across. Australia scored good on political risk and market proximity but poorly on supply diversity. East Africa ranked good on supply diversity, but political risk challenges its projects — little to no supporting infrastructure and rudimentary government fiscal and regulatory regimes handicap development of a tremendous gas resource, Mohanty said.
Mohanty was skeptical of Alaska LNG's prospects for the 2020s. Challenges include building an 800-mile pipeline, and the state's fiscal regime is uncertain "despite recent activity," he said. Assembling a $45 billion to $65 billion project takes time, and the Alaska project is in competition with many other projects for a limited window of opportunity, not to mention the big price tag itself, he said.
"By the time the Alaska project is ready for the world, the world may not be ready for it," Mohanty said.
NORTH AMERICA VS. REST OF WORLD
Houghton of Poten & Partners thinks North America projects will get half of the new Asia demand through 2030 — or 65 mtpa of demand. That leaves a lot of projects on hold: The U.S. has 140 mtpa in projects proposed that could succeed and Canada 90 mtpa, he estimated.
The U.S. projects that are merely adding liquefaction trains to LNG import terminals have a 20 percent cost advantage over "greenfield" plants that must build the piers, storage tanks, utilities and other facilities from scratch, Houghton said.
The plants that are moving fastest through U.S. regulators — including the Sabine Pass, Lake Charles and Cameron projects in Louisiana and the Freeport project in Texas — already are approaching 65 mtpa in nameplate capacity, leaving room for just one or two more North American plants, he said.
Projects in the rest of the world will supply the other 65 mtpa in his forecast. Houghton thinks Russia is positioned well, as it can deliver LNG to Asia for about $11 per million Btu — roughly midway between his estimates for the Lower 48 and Canadian delivery.
New plants will bring new pricing to Asia LNG, but oil-linkage will remain a strong component of the price formula, Houghton said. Perhaps a hybrid will develop that will be weighted 80 percent to oil via the Japan, or JCC, and 20 percent to Henry Hub, he said.
Will the gap between high Asia LNG prices and lower European and North American gas prices close?
"I don't think so," Houghton said. "Will it diminish? Yes."
Poten & Partners sees more hybrid formulas in price negotiations. Perhaps the LNG projects that succeed in the 2020s will be those most willing to accept new pricing methods, he said.
BP today announced its intention to establish a separate business to manage its onshore oil and gas assets in the US Lower 48.
Comment: Yesterday we noted that two legislators are planning for a new oil revenue stream should voters adopt an August Primary Ballot proposition to repeal oil tax reform.
That revenue stream will be based on a new policy emphasis on state investment and equity into oil and gas exploration and development projects. These are the same minority legislators who are leading an effort to repeal the SB21 oil tax reform bill passed by a majority of the House and Senate, and signed by the Governor, less than a year ago.
We can now see a strategy rising from the mist: repeal of tax reform will have to be replaced by something that produces revenue. Since repeal of reform will deflect investment, an unhappy but obvious policy replacement would be to socialize/nationalize natural resource industries...starting with the small step of massive equity investment of public funds and employment of state employees to oversee the profitability of the investments.
What could possibly go wrong?
Today, we hear in a Fairbanks News Miner editorial, that certain Mayors who reap large and mostly passive benefits from the oil and gas statewide property tax, are mounting an effort to investigate impact on their revenues from an agreement between the state and gas pipeline parties regarding the fiscal regime enabling a gas pipeline project to proceed.
Certain gubernatorial candidates oppose both oil tax reform and the fiscal terms surrounding a gas pipeline project.
The current governor supports both tax reform and the proposed gas pipeline fiscal regime.
While there seems to be alignment among major gas pipeline and oil tax stakeholders, lack of political alignment from other, vocal influence leaders could well cause oil tax reform to disappear after August, soon to be replaced by new statewide leadership and a new world of natural resource control by bureaucrats and government ownership of the 'means of production'.
Should this be the outcome, we can envision great impact, as well, on Alaska's entire investment climate, not merely limited to natural resource investors. -dh
Comment: Fox News interviewed former Alaska Governor Sarah Palin (NGP Photo) today.
During the interview, we learned that Candidate Obama opposed Candidate Romney's conviction that Russia posed a global threat to peace.
The program also produced a video of Candidate Sarah Palin, earlier warning that just as Russia invaded Georgia it could as easily invade Ukraine.
Throughout the interview, Palin emphasized the importance of approving the Keystone XL pipeline and developing domestic energy resources with Administration support--rather than Administration opposition.
Our faithful readers know that we have been hard on Palin for her Alaska oil tax and gas pipeline policies nearly a decade ago...but in this interview we found ourselves appreciating her message, which we paraphrase: "Develop America's resources aggressively and responsibly now, Mr. Obama, or watch our standing in the world and support for our allies diminish along with our national security and economic recovery."
We also note from the current issue of Petroleum News, that "Commissioner John Norman (NGP Photo) retired from the Alaska Oil and Gas Conservation Commission at the end of January. Norman, an attorney, had been the public member of the commission for 10 years. He was named to the commission by former Gov. Frank Murkowski in 2004, replacing Sarah Palin as the public mem...." (We are reminded once again of what a small world it is as we congratulate Governor Palin on her stand for domestic energy production and her replacement, Commissioner Norman, for a lifetime of service to the state and nation. -dh
Wall Street Journal by James Freeman
WARREN BUFFETT, CLIMATE-CHANGE DENIER
The billionaire chairman of Berkshire Hathaway (Photo, Buffett with NGP Publisher) is on some kind of roll. Yesterday we told you about his warning on public pension funds in his annual letter to shareholders. Now, he's puncturing deeply-held liberal myths about global warming. Mr. Buffett tells CNBC that extreme weather events are not becoming more common, and that climate change is not altering his company's calculations when insuring against catastrophic weather events. "The public has the impression that because there's been so much talk about climate that events of the last 10 years from an insured standpoint and climate have been unusual," he said. "The answer is they haven't." (We commented on the subject of climate change two days ago, invoking Aristotle's Golden Mean ideal; and we challenged both sides of the debate). -dh
Comment and link: We earlier commented on LNG competition.
Here, Peter Tertzakian of the Globe and Mail gives further insight on the softening LNG market for British Columbia exports. Are not some of Canada's LNG export concerns ones that we Alaskans share. In both Alaska's land Canada's cases, LNG market demand and competition are exacerbated by local political interests striving to obtain for themselves and their constituencies all possible benefits -- even if the end result is achieving 100% success in gaining benefits for projects that became embroiled and then doomed in a sea of local and national political struggles.
To quote our reference at the Globe and Mail: Japanese benchmark prices for LNG in Asia have been exceptionally high since the Fukushima nuclear disaster, almost exactly three years ago. Concurrently, domestic Canadian natural gas prices have been anomalously low. The resulting “differential” between the two was $15.70 (U.S.) for one million British thermal units (MMBtu) at its widest in July, 2012. It’s been that massive price gap, or arbitrage, that triggered the buy-low-sell-high opportunity to build LNG export facilities in North America, including 14 projects off the west coast of B.C.
Early Thursday News:
|This morning, we board our favorite airline, Alaska (NGP Photo, "Rockey Mountain High"), heading to Miami then on a wonderful partner airline (American) bound for writing and photography in Ecuador for a few weeks. Never fear, dear reader: every day we keep close in touch with goings on in the energy scene through our friends and associates from Inuvik to Calgary, Toronto, Washington, Houston, Williston, Juneau, Anchorage, Faribanks and Barrow...and beyond. You are our priority, and we'll keep you informed! -dh|
Juneau Empire by Matt Woolbright. Leaders from the private partners in the proposed Alaska LNG project urged lawmakers Tuesday to support the plan that they call a good business venture for everyone involved. ...
All those testifying pointed to the recently adopted Heads of Agreement document as an indicator that now is the time to press forward.
That document is “enabling unprecedented commercial alignment which is possible with the state’s participation” in the project, BP Exploration Alaska’s David Van Tuyl said.
Following up on Wednesday's report of the OCS Governors Coalition, here are other links:
The Washington Post
The Washington Post
Energy & Environment News
The News & Observer
Alliance Profile: M-I SWACO a Schlumberger Company: From Drilling through Production, Focused on our Customers
Alaska LNG Project Faces Market Challenges...And Political Challenges
Alaska and Mackenzie Delta producers are eyeing LNG exports to Asia as this generation's best option for monetizing Arctic gas.
Previous generations were close: with the Arctic Gas project in the 1970s (i.e. including TransCanada); displaced by the Alcan project in the 1980s (i.e. vigorously opposed by TransCanada); and the Alaska Highway gas pipeline project given new life with higher gas prices and passage of the Alaska Natural Gas Pipeline Act of 2004 (i.e. led by TransCanada).
Evolution of Arctic gas projects continued with Governor Sarah Palin's (NGP Photo) support of the Alaska Gasline Inducement Act (AGIA, 2007), giving a subsidy to TransCanada just as the great North American shale gas phenomenon began eliminating that market for expensive, Arctic energy.
However, with subsequent support from the Legislature and Governor Sean Parnell (NGP Photo), TransCanada's project evolved into a duet consortium with ExxonMobil, and more recently achieved significant alignment of interests with the State's Administration, Legislature and other producers.
Meanwhile, the state's operating budget is increasingly unsustainable, depending as it does on drawing down savings accounts in response to its 90% dependence on diminishing oil production.
With the Obama Administration seemingly doing everything possible to prevent oil, gas and mining activity on federal AND state lands (i.e. Readers are welcome to challenge us on this accusation and we will be happy to document it), Alaska's economic prospects are at further risk.
To add to the lack of optimism, in a diminishing oil production environment, a coalition of minority activist and anti-business groups is promoting repeal of Alaska's oil tax reform law (See yesterday's commentary)--though the majority of Alaska's private sector leaders oppose repeal.
The Senate Bill 21 reform effort was passed into law less than a year ago after years of analysis and debate about how to increase investment and natural resource production, royalties and taxes. Repealing SB 21 would send a dramatic signal to the investment world that in Alaska, "A deal is not a deal".
Now, the state's economic hopes are focused like a falcon's gaze on hopes for a gas pipeline and LNG export project whose prime market would be Asian consumers.
However, just as changing domestic gas markets over the last 45 years have killed hopes and plans for monetizing the huge Arctic gas reserves, so now do the furies appear to be conspiring against Alaska's export hopes.
In Canada, a number of LNG projects have been approved or are in mature permitting stages -- by a supportive federal government -- and seem to be mostly targeting Asian markets.
Even though Japan's Fukushima tragedy resulted in more demand for LNG, Japan is also considering lower cost coal as a competitive alternative, which diminishes consumer appetite for more expensive LNG imports. We note that Japan has been one of the most prospective markets for Arctic gas.
Meanwhile, members of Congress who have studied the issue are telling the Administration that unless the Department of Energy increases the approval rate -- and decreases the backlog -- of LNG project applications, markets could be lost to other energy sources.
The Department of Energy's LNG export function -- under direction of Assistant Secretary for Fossil Energy, Christopher Smith (NGP Photo) -- seems to be increasing its approval activity.
|Fuel Fix. Oil industry and business groups have formed a new coalition to make the case for expanded exports of American natural gas.
The “Our Energy Moment” campaign, which is described as a grassroots organization, aims to counter the arguments of export foes, as the Obama administration weighs applications to widely sell liquefied natural gas overseas.
An increased approval rate for Canadian and Lower 48 LNG projects is certainly good for North American economies.
Logically, a larger number of LNG exporters means more competition for an Alaska project.
Most projects will be attempting to secure long term supply contracts with utilities and/or large industrial users. As those markets become satisfied with the growing number of current LNG projects, Alaska North Slope and Mackenzie Delta gas will surely have a more challenging time -- as later comers -- elbowing their way into market niches that will pay top dollar for long term contracts.
We suspect that one saving grace of current Arctic gas projects is the high degree of expertise focused on their successful outcome. In particular, we note that many if not most of the Alaskan and Mackenzie Delta producers have LNG experience and some affiliated interests with each other and even with Canadian west coast and Lower 48 LNG exporters.
Where does this leave Alaskan citizens and investors?
- In six months, Alaskans will vote on whether to stabilize or destabilize their investment climate. Depending on the referendum's outcome, we can envision either massive new investment in the state or massive withdrawals of capital investment plans, over time.
- If the August plebiscite favors investment, we can envision all parties attempting to fast track gas pipeline timetables. If the vote repeals tax reform, we see a gloomy end to this generation's plans for monetizing Alaska gas.
- In the next three years, the Obama Administration will either ease up on Alaska or continue its nearly perfect record of opposing, slowing and/or stopping every major development they can in the state. If projects can be sanctioned under the federal assault, more oil and gas can contribute to a sustainable economy. If federal pressures continue and even increase, prospects for more oil, gas and mining production are limited.
In conclusion, we cannot overstate the importance of the August referendum vote on whether to repeal Senate Bill 21.
This is because repeal of SB 21 would recreate an investment climate that has minimized what could have been sufficient investment to stabilize if not reverse waning, North Slope oil production.
As we have demonstrated above, Arctic gas LNG projects will have a challenging enough time finding a market niche even in the best of circumstances. But repeal of SB 21 will, in our view, totally emasculate the investment climate along with plans for a gas pipeline.
We would also offer this additional perspective on the highly lauded, state financed, in-state gas pipeline project, under control of the Alaska Gasline Development Corporation. That project was designed to meet growing demand for natural gas as a heating and power supply for the majority of Alaska's population.
But with 90% of the state budget depending on oil production -- along with a third of Alaska's economy -- repeal of SB 21 would result in growing job losses and a massive, lemming-like out-migration of citizens from the state over the next five years.
In such circumstances, existing natural gas supplies will be more than sufficient to supply the survivors without the need for or expense of a new, in-state gas pipeline.
Finally, we invite those seeking optimism to find it by joining us in seeking a stable tax environment and for more powerfully exercised state's rights in the face of an overreaching and predatory federal government.
The Pebble Partnership (PLP) this week announced that Pebble CEO John Shively (NGP Photo) will assume the role of Chairman of the Board of Directors—a move that allows Shively to be a part of the strategic leadership team for advancing the project. With this move, PLP is appointing Tom Collier to the position of CEO for the company. (Read more here.)
VIDEO LEFT (audio link): Yesterday afternoon the state's gas pipeline leadership appeared before the Senate Resources Committee.
Representatives of Alaska's three major Alaska North Slope producers, TransCanada and the Alaska Gasline Development Corporation briefed lawmakers on the accord they have reached to further develop the Alaska LNG Project. The agreement is historical and this particular meeting encapsulates the understandings of the parties. Accordingly, we urge readers to bookmark the video and/or audio in their archives. -DH
See today's relevant Consumer Energy Alliance news links:
Politico Pro: For activists, a new open season on Keystone
The Consumer Energy Alliance is hoping to rally supporters of the project with a call to action through the Build KXL Now site where people can sign a letter lauding the benefits of the project. “President [Barack] Obama will make the final decision, but your support is going to be the deciding factor,” CEA President David Holt (NGP Photo) wrote to supporters. “Let’s make it absolutely clear that the American people support building the Keystone XL pipeline.”
Globe and Mail by Brent Jang. Northwest Territories Premier Bob McLeod (NGP Photo) says the key to reviving dormant plans for the Mackenzie Valley pipeline will be to transport natural gas from the Arctic into British Columbia instead of Alberta. Private-sector proponents of the Mackenzie line consider the NWT project to be currently uneconomic, based on market conditions of plentiful gas supplies in North America.
Arctic Gas Leadership
We have much respect for the 12th Premier of the Northwest Territories, Bob McLeod, and for his dedicated leadership of a huge, 440,000 square mile area that is about 2/3 the size of Alaska.
While we have itemized Alaska's myriad conflicts with its federal bureaucracy, the NWT has had its own federal challenges, too.
Like premiers preceding him, McLeod has fought to transfer control over natural resources from Ottawa to Yellowknife (i.e. devolution). He has governed a great land with fewer than 50 thousand citizens and worked to develop a responsible, resource-based economic powerhouse in the Arctic.
...and, he tenaciously pursues the 45+ year-old Arctic gas dream of moving Mackenzie Delta gas to market.
Simultaneously, Governor Parnell pursues a similar Arctic gas dream.
Most of the industry players in the Mackenzie Delta are Alaska North Slope producers/explorers as well. TransCanada is another party both projects have in common.
Once, it made more economic sense to move Alaskan and Canadian Arctic gas to market in the same pipeline. First, there was the Arctic Gas Pipeline route across the top of the Arctic National Wildlife Range (i.e. now a 'refuge'); then came the Alaska Highway route.
Labor, Environmental, and Canadian Aboriginal forces worked together to create obstacles for those project over the last four decades--in addition the brutal economic challenges posed by weak gas prices a generation ago to the shale phenomenon today.
We are sure that behind closed doors, industry and government policy makers in both the US and Canada would agree that the most efficient movement of Arctic gas would still occur through a joint pipeline. After all, the cheapest pipeline produces the greatest net profit to producers and the greatest volume of royalties and taxes to government.
Today, shale gas has cut off the concept of a Mackenzie Valley pipeline to the Central US and Canada.
So now, Premier McLeod is hoping Canadian Arctic gas can find its way to British Columbia as Alaska's Governor and producers are hoping economics and markets will support the movement of Alaska gas to Valdez.
Both the Canadian and Alaskan Arctic gas projects would be competing with each other for big but limited Asian markets.
Today, one cannot help ask: "Why not move Mackenzie Gas over ANWR in a safe, environmentally acceptable, buried gas pipeline to Prudhoe Bay?"
The two gas streams could flow to Valdez and the economies of scale would benefit producers and governments and citizens in both areas.
We are sure there is an answer to our question of, "Why not?"
The answer is, "Don't be naive. That may be more logical but you've got restricted rights of way that would likely take acts of both Congress and Parliament. Besides, we're already committed to planning for separate projects."
We agree that the political realities make the most logical solution to freeing Arctic gas unlikely.
We would also observe that through great leadership, great obstacles are overcome.
It would be a shame if Alaskans and Canadians were deprived of Arctic gas exports for another generation because two separate projects were just slightly short of economic feasibility when a joint projects' economies of scale could have produced prosperity for hundreds of thousands of citizens in both countries.
And so the Arctic Gas saga continues....