By Dan Fiorucci
9:00 PM AKDT, September 14, 2012
In Valdez Friday, the 8th Annual LNG Summit wrapped up with lots of determination, but few tangible results.
For the past two days energy experts from all over Alaska, other parts of the country and other parts of the world, gathered in Valdez.
They were all on-hand to discuss one thing:
How to get a gas pipeline built from the North Slope to tidewater-- so that Alaska can cash-in on the need for natural gas in the lucrative Asian markets.
Those markets are growing thanks, in large measure to 2 trends: China's phenomenal economic expansion -- where a 6% annual increase in GDP is considered a "slow" year -- and Japan's turning away from nuclear energy in the wake of the disaster at Fukushima.
Both countries are now demanding increasing amounts of energy -- much of which could be supplied by Alaskan Natural gas.
Alaska's 35 trillion cubic feet of proven Natural Gas Reserves are all "Stranded" at the North Slope -- where it's not easy to ship the gas out profitably.
So the state is considering construction of an 800-mile-natural gas pipeline. Its goal, to reach "tidewater" in Southern Alaska -- so the gas can be liquefied and shipped of to Asia.
But the state has been mulling over this idea for decades. And nothing of consequence has ever happened.
However, there are indications that the time to act is now. The prime indicator is,the world's increasing demand for Natural Gas. Nat gas is in big demand because its carbon dioxide emissions are only half that of coal. It's also in demand because it's pretty darn cheap. It costs about half as much per unit of energy delivered as gasoline does.
So why can't Alaska just sit back and let the customers knock on its door -- begging for our Nat gas?
The answer can be summed up in a single phrase: Hydraulic Fracturing. The new drilling method uses high-pressure water to fracture rock deep beneath the earth. The process frees "tight" oil and gas. The process has come on line big-time in the past half decade in the Lower-48.
And "fracking" promises to make the U.S. awash in natural gas. In fact, the country is getting ready to change from a net importer of Nat Gas to a net exporter over the next few years.
And that's the rub for Alaska. As little as 6 years ago, it looked as though WE were in the driver's seat. The world needed Nat Gas, and Alaska had the biggest reserves of conventional gas anywhere in the U.S.
Back in those days, there were plans to build a gas pipeline from the North Slope -- winding 4000 miles through Alaska, Canada and finally Illinois -- where it might have electrified houses in Chicago.
Those were the good old days, when Alaska seemed to be in-charge when it came to natural gas.
But hydraulic fracturing -- combined with directional drilling -- changed all that by pulling up oil economically from places it had never been drilled for commercially. Nat gas can now be removed profitably from those "tight" shale formations deep beneath the earth.. and it's now being drilled-for in a big way.
That means Alaska is no longer the only potential U.S. producer of exported LNG for the world market. Now something like 18 ports -- all over North America -- are vying for the opportunity to liquefy natural gas and ship it overseas.
Which means the pressure is really on for Alaska to finally build the pipeline from the North Slope. If we don't move now, countries like Qatar and Australia are likely to crack the lucrative Asian market before Alaska can. in addition, nat gas competitors from U.S. Gulf Coast states could secure foreign markets as well. And that's really bad news, because these contracts are written in 20-year-increments. If Alaska misses out now, it could lose a valuable window of opportunity that will setback the cause of building a 20 billion dollar gas pipeline for many years to come.
Some energy experts say the reason we're in the fix we're in is because Alaska made a big mistake in its dealings with North Slope Producers. It gave Exxon, ConocoPhillips and BP veto power over Nat Gas Pipeline plans. It's like the tail wagging the dog - at least according to one energy expert at the conference. That expert said that the state is the landowner at the North Slope, and it should tell its tenants -- the oil companies -- "Hey, we're lining up buyers. Either sell the gas to those buyers by building a pipeline, or we'll dictate the terms that you can sell it at the wellhead -- and we (the state) will build the pipeline".
He believes that's the way Alaska needs to go in order to get this project done.
But at 20 billion dollars -- along with 10 years of permitting and construction-- it's obviously a big deal. And it has to be done right.
Nevertheless, Alaska has one big ace up its sleeve when it comes to selling nat gas to Asia. Our proximity to places like China and Japan countries gives us a transportation-cost advantage.
But the state has to start moving now, the experts say. If it doesn't sign-up buyers soon, it may miss out on an economic opportunity that could rival the wealth that the Trans Alaska Pipeline has generated.
Perhaps Congressman Don Young (R) Alaska -- attending the Valdez LNG Summit by video link from Washington, D.C. -- summed it up best.
"We've got to stop thinking like Fairbanks residents or Anchorage residents", Young said. "We've got to start thinking like Alaskans. Wherever route this pipeline takes through our state, it will benefit all Alaskans."
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