BP calls on policymakers to endorse Alaska pipeline

By OGJ editors

WASHINGTON, DC, Nov. 7 -- The fate of a sweeping US energy reform bill remains uncertain, but BP PLC officials said Wednesday that Congress sooner than later needs to consider legislation that encourages construction of an Alaska natural gas pipeline from the North Slope to the Lower 48 states.

"Energy legislation is essential now to enable the gas to flow in 10 years," BP official David Welch said at a Washington briefing. Welch is overseeing BP's potential investment in the massive project, with an estimated construction cost of $20 billion.

He said Alaska gas is needed since traditional supplies cannot keep pace with US demand.

"We expect existing production areas will struggle just to maintain current supply," Welch said. "All North American sources of gas plus new LNG imports are needed to meet demand."

Without a new gas supply, a gap of 15 bcfd (6 tcf/year) or more is likely within 10 years, the company said.

"Alaskan gas can close a third of this gap, but project size, risk, and fiscal terms have discouraged investment so far," officials said.

Pipeline issues
Before the November elections, lawmakers were considering a Senate plan that offered both loan guarantees and a floor price to spur construction of an Alaskan gas pipeline. Senate language includes a $10 billion loan guarantee, along with a tax credit that is triggered when the Alberta natural gas hub price falls below $3.25/MMbtu. The White House endorsed the idea of a pipeline but had serious reservations about the incentives connected with the project.

Congressional leaders have signaled that chances are remote for energy reform legislation to be considered before yearend. White House officials meanwhile say they consider energy legislation to be a high near-term priority, although no timeframe has been given on when they want Capitol Hill to send legislation.

Producers recently completed a $125 million study to assess cost, technology, regulatory and environmental issues connected with the 4.5 bcfd line (expandable to 5.6 bcfd).

Producers estimated that the toll to US markets would be $2.39/Mcf under either a "southern" or "northern" route.

The House bill does not offer any kind of tax incentive for the pipeline but calls for the same southern route as the Senate bill, which parallels the oil pipeline from the North Slope to Fairbanks and then the Alaska Highway to British Columbia. Producers also are considering a northern route across the Beaufort Sea into Canada's Mackenzie Valley.

Canadian government and industry officials registered serious concerns over the Senate fiscal package, especially the price floor, saying the proposal violated existing free-trade agreements.

Meanwhile, Canadian producers are eyeing their own pipeline for the Mackenzie Valley, which is slated to be complete within 8 years.

BP officials say they do not expect that line to compete with the Alaska line because demand will be robust enough for both projects.

They are hopeful a pending "hybrid" fiscal option before US lawmakers enjoys enough bipartisan support to survive in the new Congress next year or even possibly in a lame duck session this year. Under that proposal, BP says, the federal government can inexpensively improve the financial risk of the project to attract capital. The company maintains each portion of the proposal is similar to past government policies endorsed by both political parties.

Hybrid plan
Instead of a controversial floor price, BP supports a production tax credit that provides as much as 52¢/MMbtu credit for Alaska gas transported to market. The credit phases out to zero when prices are $1.35/MMbtu.

In this latest plan, the US government would guarantee up to 80% of the total capital cost of the project. BP argues the risk of default is extremely low, and there is precedent for policymakers. Loan guarantees previously have been used to support troubled industries and in Canada. BP also wants the government to allow pipeline owners to accelerate depreciation of the asset from 15 to 7 years. Finally, they would like to see a 35% tax credit for a gas treatment plant connected with the project.

Fellow North Slope producer ConocoPhillips also supports the idea of a production tax credit, federal loan guarantee, and accelerated depreciation, industry officials connected with the project said. ExxonMobil Corp. has not officially endorsed any of the new fiscal terms, although sources said company officials "certainly aren't discouraging it either."

Related Articles

ConocoPhillips revises down $2 billion from budget

01/29/2015 ConocoPhillips has shed an additional $2 billion from its capital expenditures for 2015, decreasing total spending to $11.5 billion from the previo...

Chevron, BP, ConocoPhillips join to explore, appraise Gulf of Mexico leases

01/28/2015 Chevron Corp. subsidiary Chevron USA Inc., BP PLC unit BP Exploration & Production Inc., and ConocoPhillips Co. have pledged to work together t...

Conoco's Lance calls for repeal of US crude oil export ban

01/26/2015 The US crude export ban that was imposed in 1975 should be repealed 40 years later to ensure the US oil and gas renaissance continues, ConocoPhilli...

For the US economy, a falling oil price has drawbacks, too

01/05/2015

Cheer in the US about an economic lift from falling oil prices needs qualification.

ConocoPhillips slashes 2015 capital budget

12/22/2014 ConocoPhillips has elected to reduce its 2015 capital budget to $13.5 billion, down 20% compared with this year's budget. The news comes on the hee...

ConocoPhillips slashes 2015 capital budget

12/08/2014 ConocoPhillips has elected to reduce its 2015 capital budget to $13.5 billion, down 20% compared with this year’s budget. The news comes on the hee...

BLM issues final SEIS for Greater Mooses Tooth project in NPR-A

10/30/2014 The US Bureau of Land Management released its final supplemental environmental impact statement for the proposed Greater Mooses Tooth (GMT1) oil an...

Western gulf lease sale attracts $110 million in high bids

08/20/2014 Gulf of Mexico western planning area Lease Sale 238 drew 93 bids from 14 companies over 81 blocks covering 433,823 acres, totaling $109,951,644 in ...

ConocoPhillips, Enap sign deal to study unconventional oil, gas in Chile

08/06/2014 ConocoPhillips and Chile’s state oil company Empresa Nacional del Petroleo (Enap) have signed a technical agreement to jointly conduct geological, ...
White Papers

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by
Available Webcasts

On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected