AGIA is dead but for the politics

Obviously, AGIA is not dead. However, the announcement Friday of a cost increase of an estimated $41B is not conducive to supporting a belief that either AGIA or Denali can be feasible economically. Especially, since the completion date is estimated to be at least 2020.

Given that costs of operations on the North Slope have risen 68% from 2001 to 2009, one can reasonably figure that AGIA’s costs will increase between now and any anticipated start date, say 2015. Since AGIA’s estimated cost was about $15B-$25B, depending upon the source during the Palin v. Murkowski campaign, one can estimate that the completed cost will be somewhere between $75B and $100B by estimated shipment of the first gas in 2020.

Shell announced that it is cutting back its expansion of production of oil from Alberta’s tar sands from a target of 700,000bpd to 225,000bpd for the foreseeable future. Shell will be shifting its emphasis to offshore and onshore exploration, something the company had not emphasized until a recent change in management. Increased cost in the reduction in the expansion of the tar sands recovery was cited as the reason.

It is my belief that AGIA is dead, given the shale gas production Outside and in Canada. Exxon spent $41B buying the company with the largest shale gas holdings in the U.S. One also has to remember that Exxon is committed to a 25 year commitment with Qattar to bring gas to the U.S. The expansion of LNG terminals in the U.S. to 4.5bcf is an interesting number, as that was the planned capacity of big diameter pipelines from Alaska to Canada to the U.S. Any introduction of Alaska gas at that rate would have a depressing effect on the price of natural gas in the region in which it is introduced.

There are those who believe that the President will not allow Alaska to export LNG. That given this belief, the all-Alaska pipeline would not be feasible as Alaska’s gas could not then be exported. This position is belied by the fact that Alaska has been shipping gas from Nikkiski to Japan for the last 40 years. Given this fact, the all-Alaska pipeline would have a market in Asia, primarily in Japan.

The big question now, is what will be the outcome of the AGIA Open Season? Will the producers step up to send gas to Canada? Not likely, for the reasons stated above. However, AGIA was flexible, with a 2.0bcf pipeline to Valdez as the LNG option. That option may see interest, as Asia offers higher prices to Outside markets now uncertain because of shale gas development.

The outcome of the AGIA Open Season will not be known until NOVEMBER, after the general election is over. This plays in the favor of Gov. Sean Parnell. However, if the arguments on the part of Bill Walker regarding the viability and benefits of the all-Alaska pipeline option continue to find favor with Alaskans, Gov. Parnell will need something substantive to show the people that AGIA will produce results before the August Primary.

It is obvious, with the filing of HB312, that Rep. Jay Ramras, Rep. Mike Chennault, Rep. Mark Neumann, Rep. Bill Stoltze, Sen. Lesil McGuire, Sen. Charlie Huggins are hoping to confuse the idea of the Noah Parks Highway 500mcf pipeline sufficiently to get the people to forget that we voted for the all-Alaska route back in 2002 and again in 2006 with the election of Palin/Parnell. These legislators forget that they have ignored the will of the people as egregiously as did governors Murkowski, Palin and Parnell.

The reality here is that although there was no announcement, AGIA’s viability is suspect, due to the doubling of the price tag over less than 4 years. That fact cannot be attractive to potential investors.

The only sure thing is the all-Alaska natural gas pipeline proposed by Bill Walker, and voted upon by Alaskans in two separate elections. That pipeline is permitted, and ready to begin construction. All it needs is a governor to lead the way.

Parnell is having fun as Gov

(One has to wonder why Todd is laughing during Parnell's swearing in ceremony. Could it be that it is because Sarah is off the hook and into the money?)

Gov. Sean Parnell is having more fun as governor than the proverbial fly on fly paper.

First, Parnell’s Gas Pipeline Czar, Harry Noah—see, Obama’s not the only one with Czars, but then this was Sarah’s appointment, Parnell just went with what was there—decreed that the cheapest construction for a natural gas bullet line to south central was down the Parks Highway. What was not disclosed was the cost of the gas at the delivery end. 500 mcf per day stand alone will carry a hefty price tag by the time it gets to Anchorage. The portent in this is what? An admission that any construction on any big pipe project will not come soon enough, or not at all?

Parnell went to D.C. to lobby for off shore drilling. This effort failed in the face of Obama’s BLM Secretary, Salazar, deciding, nah, we don’t need no stinkin’ offshore drilling! Screw any rational energy policy! Let them ride bicycles! No fault of Parnell’s. At least he tried. Loss to Alaska, around $100,000,000 in services and labor to the effort by Shell and others. Shell had previously abandoned its offshore plans in the face of a hostile resource development federal administration.

Parnell is also lobbying Congress against a bill that would bar aerial predator control. A stupid, shortsighted bill on the part of politicians who do not understand Alaska and the needs of her people.

Try paying $11 for a quart of milk, sometime. That’s the Bush cost because Alaska cannot build roads to connect our communities. ANILCA. Gee thanks, Pres. Carter.

I wonder if the feds want Alaska back? I mean, thus far, they have taken away our management of all lands and offshore as granted in the Statehood Compact, imposed new land use restrictions under ANILCA and now the offshore drilling restrictions, and refusing to allow drilling onshore or offshore of ANWR.

Congress recognized that providing Alaska the infrastructure that the rest of the State’s enjoyed in 1958 would break any future federal treasury several times over. That’s why the Congress gave Alaska a 90% royalty off of all mineral and hydrocarbon development. Oh, wait, Congress reneged on that with the Petroleum Reserve 4 lease sale in the late 1990s. What Statehood Compact?