Phillips Alaska official: North Slope gas sales by 2007

Sales of natural gas from Alaska�s North Slope to the Lower 48 are achievable as early as 2007, says the president and CEO of Phillips Alaska Ltd. Kevin Meyers told a Ziff Energy conference on gas supply and demand in Calgary today that a pipeline from the North Slope is the primary option being studied to move gas to southern markets.


Sales of natural gas from Alaska�s North Slope to the Lower 48 are achievable as early as 2007, says the president and CEO of Phillips Alaska Ltd.

Kevin Meyers told a Ziff Energy conference on gas supply and demand in Calgary today that a pipeline from the North Slope is the primary option being studied to move gas to southern markets. Other options are liquefied natural gas exports to export markets and gas-to-liquids technology. He said a 7-8 million tonnes LNG project is being studied that is aimed at the Far East export market, but it is not economic yet.

Meyer said no decision has been made by companies with North Slope reserves but a possibility is a $10 billion US pipeline with capacity of 2.5-4 bcfd, intended to carry gas from the North Slope south through Canada to pipeline connections at Caroline, Alta. He said it is too early to rule out any pipeline route or option for moving gas. But, he said, a decision on how to move the gas and a start on the regulatory process is expected late in 2001.

Gas owners include the state of Alaska with 3 tcf; Phillips, with 8 tcf of gas at Prudhoe Bay; ExxonMobil Corp, 8 tcf; and BP, 6 tcf.

The Phillips executive said the Alaskan North Slope is the new frontier, with 25-26 tcf of proven gas at Prudhoe Bay and 35 tcf on the slope in total, which will be called on to deal with growing US demand for the fuel. He estimated total potential for North Slope gas at up to 100 tcf, but said there really hasn�t been much gas exploration yet.

Meyer said the pipeline price tag of $10 billion would be for a line from Prudhoe Bay to Alberta with capacity of 2.4 Bcfd and would include the cost of a gas processing plant.

Meyer said a price of $3.50/Mcf or higher at Chicago is favorable for North Slope gas marketing but lower than that, developers would have to study the economics of the project closely. He said North Slope gas is being examined in a supply/demand situation in which reserves in all major US basins are in decline, with the exception of the Rocky Mountain region.

He said with a forecast annual demand growth of 1.8% in the US, the industry will have to look at North Slope gas as a new supply source by the end of the decade or sooner as well as invest more in exploration and development of Lower 48 Basins.

The Phillips executive said producing the gas cap at Prudhoe could have an impact of 200-400 million bbl on crude oil production, without any efforts such as water injection, but steps could be taken to subsatantially reduce any impact.

Steve Savidant, president and CEO of Canadian Hunter Exploration Ltd., Calgary, said the Western Canada Sedimentary Basin (WCSB) is a maturing, but not mature basin, which still has much gas to be found and produced. But Savidant said strong natural gas prices are creating a Klondike gas rush and challenges for companies.

These include including deeper and more complex geology, rising prices, more expensive land access, a shortage of skilled professionals, and the need for technology development. He said skilled labor such as geologists and geophysicists is scarce and rig rates are up 20%.

Savidant said almost 50% of the land in the WCSB has not been drilled, and that figure would likely rise to 75% if zones below the Cretaceous are included. He said National Energy Board estimates of 58 tcf of gas reserves in western Canada is likely conservative.

The Canadian Hunter CEO said the Western Canada industry also faces continuing consolidation, which has already eliminated about 60% of medium-sized companies. He said strong and larger firms will now combine to tackle large projects in the frontiers and elsewhere. Consolidation should benefit gas supply by creating better capitalization and improved efficiency.

Savidant said despite the challenges, a good decade lies ahead for the natural gas industry.

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