Alaska governor sticks knife in TransCanada’s back
Sean Parnell now favors LNG to get North Slope gas to market
TransCanada Corp. can’t seem to catch a break.
Those who follow the energy industry know all about its recent woes regarding the Keystone XL pipeline. Now the Calgary-based pipeline company has a former ally, Alaska Governor Sean Parnell, turning on them and the firm’s Alaska Pipeline Project.
Speaking at the annual Alaska Oil and Gas Association conference in Anchorage on Thursday, Parnell told attendees that Alaska should pursue a liquefied natural gas (LNG) project that would ship chilled North Slope gas to Pacific Rim markets. It’s a startling public statement from Parnell. After all, back in 2008 when Sarah Palin was still the state’s governor, TransCanada won an exclusive state license for the pipeline, which grants TransCanada up to $500 million in state subsidies to plan the 2,700-kilometer conduit.
But given what we know, perhaps Parnell’s statements aren’t all that surprising. The governor is aware how low natural gas prices are in most North American markets these days (below US$4.) And he knows how high they are in places like Japan and South Korea ($US16.50 and $US14, respectively.) TransCanada and its project partner, ExxonMobil, also were unable to secure any shipping commitments for the pipeline during an open season held in 2010. (To be fair, the proponents’ website does say they are still negotiating with potential shippers to get those commitments.) The pipeline seems no closer to becoming a reality than it was in 2008.
That’s not good for Alaska. Sending large stores of North Slope gas to market is a big priority for the state. It currently gets about 90 per cent of its general revenue from oil and gas royalties. But production from the aging Prudhoe Bay oilfields is declining and the state is desperate to offset that decline with natural gas production. It surely hasn’t been lost on Parnell that as progress on the TransCanada/ExxonMobil project inches along, LNG export terminals are being approved on Canada’s West Coast.
Is this the final blow for TransCanada’s Alaska Pipeline Project? In May, the North’s Slope’s other big players – BP and ConocoPhillips – dropped out of the not-so-great Alaska pipeline race. Now Alaska’s governor is turning his back on TransCanada’s scheme. Ouch.
New leader, same results?
The Northwest Territories, a land thought to be rich in oil and natural gas, has a new premier and he should be familiar name to the oil and gas industry: Bob McLeod.
In his former role as the NWT’s minister of industry, tourism and investment, McLeod was one of the biggest boosters of the Mackenzie Gas Project (MGP). Now sitting in the premier’s chair, McLeod will surely turn up the volume on his pipeline messaging in an effort to convince the pipeline’s proponents, led by Imperial Oil Ltd., to build the thing.
Good luck with that. (Full disclosure: I worked for McLeod’s department as its communications manager before taking the Alberta Oil job in January.) It’s been 10 months since the National Energy Board approved the MGP and gave NWT residents hope the pipeline would finally come to pass. But ample supplies of shale gas, low natural gas prices and the high price tag of building Arctic pipelines – the estimated cost of the MGP is roughly $16.2 billion – have conspired against the project.
Imperial Oil has given no indication it’s going to go ahead with the project. In fact, it seems preoccupied with steering the Kearl oil sands mine to the finish line. At this point the MGP is almost like the crazy uncle that is locked up in the attic so the family can avoid embarrassment. Out of sight, out of mind. But McLeod hasn’t forgotten about the crazy uncle and he would like to get him out. I don’t like his chances.