Projections and the pipeline

Feb. 15, 2010
I like statistics. I liked them on the back of baseball cards when I was a kid.

I like statistics. I liked them on the back of baseball cards when I was a kid. I like them as produced by organizations such as the US Energy Information Administration and Canada's Energy Resource Conservation Board (ERCB) today.

As much fun as they are to look at for history, however, looking at statistical projections like those offered in EIA's Annual Energy Outlook 2010 Early Release Overview for a glimpse into the (potential) future is even more tantalizing. Is this what things will really look like? What if x, y, or z happens instead of a, b, or c?

Alaskan pipeline

TransCanada and ExxonMobil Corp. filed its plan with the US Federal Energy Regulatory Commission in late January for approval to conduct an open season on its Alaska Pipeline Project to move natural gas from Alaska's North Slope. Two options were submitted for shipper assessment: a $43 billion, 1,700-mile, 4.5 bcfd line from ANS to Alberta and a $26 billion, 800-mile line transporting 3 bcfd of gas from ANS to Valdez, Alas., where it would be converted to LNG. In April, Denali—a consortium of BP PLC and ConocoPhillips—will submit to FERC the open season package for its competing 2,000-mile, $30 billion pipeline.

TransCanada expects its line to be in service by 2020. EIA used a date of 2023 in making its most recent AEO projections. The projections and accompanying text make for interesting reading in the context of the Alaskan gas line discussion.

EIA places US gas consumption at 24.86 tcf in 2035, up from 23.25 tcf in the 2008 base year. Net imports fall to 1.46 tcf from 2.95 tcf along the same timeline as production rises even more rapidly than consumption (to 23.34 tcf from 20.62 tcf). The wellhead price in 2008 dollars for both years is $8.06-8.07/Mcf.

Looking at 2020, the year TransCanada expects to have its line operating, EIA sees production having slipped to 20.04 tcf with net imports of 2.57 tcf and a wellhead price of $6.03/Mcf. The 4-bcfd difference between 2020 and 2035 production could well represent Alaskan production.

AEO 2010 also sees continued US shale gas growth as supplanting more-expensive offshore production and places current Lower 48 states' technically recoverable reserves, including shale gas, at 347 tcf, equivalent to 17.3 years' supply even at 2020 production rates.

Perhaps shale gas is not a prohibitive impediment to an Alaskan gas line.

Oil sands

Producing oil from Alberta's oil sands is an energy-intensive process. Gas has and will continue to provide a good deal of this energy. In a June 2009 report, ERCB says raw bitumen production in Alberta will reach at least 3 billion b/d by 2018 from 1.31 billion b/d in 2008. Even so, ERCB expects all domestic gas demand to equal just 50% of domestic production by 2018.

Oil sands producers are exploring various means of attaining gas self-sufficiency, including asphaltene burning and bitumen gasification.

Perhaps Alaskan gas won't all get absorbed in Alberta's oil sands.

China, Asia

EIA's International Energy Outlook 2009 predicts China will meet more than one third of its gas consumption in 2030 via imports. It sees China's consumption growing from roughly 2 tcf in 2006 to 7 tcf by 2030, meaning imports by then will total roughly 2.5 tcf.

Over the same period, EIA forecasts production in Australia and New Zealand to increase 2.8 tcf, much of which is already designated for export, but consumption in non-OECD Asia as a whole to rise to 24.5 tcf from 9.4 tcf. The agency sees non-OECD regional production growing 8.8 tcf between 2006 and 2030, but 2.2 tcf of this growth will occur in China.

Perhaps Alaskan gas is destined for export as LNG.

These numbers aren't predictive. One need only look at the recent relationship between supply-demand and prices in the crude market to know it takes more than fundamentals to guide a market. Many other factors, be they political, cultural, economic, and environmental, will come to bear in determining the ultimate disposition of ANS gas. But keeping these projections in mind might at least help frame the discussion.

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