Jim Stott
Calgary Correspondent
CALGARY, Jan. 16 -- ArctiGas Resources LP, Calgary, has filed a preliminary information package with Canada's National Energy Board (NEB) for a single pipeline system to move gas from the Canadian and US Arctic.
ArctiGas, an affiliate of Arctic Resources Corp., Houston, said the $7.8 billion (US) phased project would involve 1,684 miles of pipe to move up to 5.2 bcfd of gas from Prudhoe Bay and the Mackenzie Delta south to pipeline connections in Alberta and North American markets.
ArctiGas made the NEB submission on behalf of Northern Route Gas Pipeline Corp., a Northwest Territories aboriginal group which would ultimately own the pipeline system. ArctiGas said it will now work on a project application to the NEB.
The proposed pipeline system would consist of two parallel pipelines in a completely looped system. The initial line would be 36-in. from Inuvik in the Mackenzie Delta to northern Alberta. A second line would be 36-in. or larger, depending on supply and demand conditions and industry ability at the time to build large-diameter lines.
The pipeline would be built and put into service in four sequential overlapping phases. The Canadian segment of the line would be 1,491 miles long, with an Alaskan segment from Prudhoe Bay to Inuvik of 193 miles.
The offshore sections of the line would run along the bottom of the Beaufort Sea, and the onshore segment -- from Inuvik to near Edmonton, Alta. -- would be buried.
Phase one of the project, from Inuvik to Alberta, would come on stream in third quarter 2007. Phase two from Prudhoe Bay would come on stream in third quarter 2008.
Forrest E. Hoglund, chairman and CEO of Arctic Resources Co., said the economics of a single pipeline are compelling compared with a number of other proposals which would involve separate lines from Prudhoe Bay and the Mackenzie Delta.
"This project is the right project, the right way to do it, and now is the right time," Hoglund said.
Hoglund said shipping Canadian gas along with production from Alaska would reduce transportation costs for shippers in both countries. He said the project offers substantial economies of scale and higher wellhead prices for producers. Also, he said, higher wellhead prices would also generate more royalty and tax income for Alaska and Canada and increase incentives to explore for more gas.
Hoglund said the aboriginal population living along the pipeline route would have a 100% ownership interest in the pipeline as shareholders of Northern Route Gas Pipeline Corp.
He said the 35 tcf of reserves at Prudhoe Bay lowers the investment risk, and the project would be financed through investment-grade revenue bonds. He declined to name investors associated with the project, but said most have ties to the petroleum industry.
Hoglund said the economic merits of the project will overcome a number of potential hurdles.
These include the fact that Alaska has passed legislation against an offshore Beaufort Sea pipeline, and producers who own reserves in the Mackenzie Delta have already signed a memorandum of understanding with an aboriginal pipeline group representing most people on the Northwest Territories. The territorial government also supports pipeline development by the producer group headed by Imperial Oil Ltd.
Hoglund said he expects both producers and the state of Alaska will decide to support the ArctiGas project once they evaluate its economic merits.
"We are in the process of building a consortium of interested parties, including producers, gas buyers, explorers, pipeline companies, and aboriginal and Alaskan Native American groups. We expect both Alaskan and Canadian producers to eventually buy into the project," Hoglund said.
Harvie Andre, chairman of ArctiGas, said the "over the top" pipeline route offers the most benefits to Canadians. He said a study by the Canadian Energy Research Institute indicates that the toll for combined Alaskan and Delta gas to Alberta would be 53¢ (Can.)/GJ and tolls for a stand-alone Mackenzie line would be 88¢ (Can.)/GJ. He said the proposed pipeline route that follows the Alaska Highway would strand large volumes of Canadian gas.
Larry Tourangeau, president of Northern Route Gas Pipeline Corp., said the ArctiGas project would offer substantial benefits for the aboriginal population of the north and offer new opportunities to younger generations.
