Yes, this item goes back a couple of weeks now, but indulge me for a minute.
It's inevitable that when you're talking about the kind of money that gas sales could provide for the state of Alaska, that projects can become political footballs. The Republicans are holding their primaries for this November's gubneratorial elections, and current GOP Gov Sean Parnell is being pressured to release TCPL's Open Season results before the August primary. Challenger Bill Walker believes that the entire AGIA process has been a bust, and thinks that TCPL's shipping commitments will bear that out. He then goes on to accuse Parnell of "hiding" this, and promises that as Alaska Governor, he'll make sure an "All-Alaska" pipeline project gets built that will pipe gas to Valdez, liquify it, and send it out on ships. After all, that works for oil, right?
I have no dog in the hunt whatsoever, but I can smell the political BS when I come across it. Let's remember that Sarah Palin herself suggested she favored the "All-Alaska" project, at least before she made it into office. It's a convenient, populist platform that plays into the deeply patriotic feelings of the Alaskan population. The trouble is, it won't work.
Why not? First off, the numbers are questionable. We're still looking at upwards of $20 billion to build a line down to Valdez and establish the liquifaction plants. Once they're built, those plants will need huge amounts of energy that will likely come from burning off some of the gas. I'm not an engineer, and if anyone knows better I welcome a correction, but I'm guessing that will take upwards of 20% of the product off the table right away. Even beyond that, the capacity to ship will be down compared to a pipeline into Canada.
Once that gas makes it on to a ship, there are issues, too. The Jones Act prohibits ships built outside the US from shipping between two American ports. The most likely port for the ships to sail to? Kitimat, BC. Where the gas will ship through Canada anyway.
The second issue? There's really no such thing as an "All-Alaska" gas project, because at the end of the day, most of that gas has to ship OUT of Alaska to find a market. The vast majority of the gas has to leave the state, whether it be on a pipeline into Canada, or on an LNG tanker going who-knows-where. And setting aside the technical issues and the economics, LNG is a much more "fluid" market (pardon the pun) than piped gas. If you have a customer in, say, Japan who finds a cheaper supply of LNG than yours (and given that $20 bln in capital costs, that might not be hard), you'll need to find a new place to send those ships.
I understand that the "All-Alaska" line sounds good in Alaska. Particularly for people who have a vested interest in Valdez, which stands to lose jobs and money as the oil supply declines. But wanting something doesn't make it a good idea.
"There's really no such thing as an "All-Alaska" gas project, because at the end of the day, most of that gas has to ship OUT of Alaska to find a market. The vast majority of the gas has to leave the state, whether it be on a pipeline into Canada, or on an LNG tanker going who-knows-where."
ReplyDeleteThe line to Valdez will satisfy 100% of in-state demand. The export of gas will generate revenue for the state of Alaska to offset declining oil revenues. Because the line is built entirely on Alaskan soil, the jobs will stay in Alaska. Because the gas starts and ends in Alaska, we will keep the gas liquids which means long term value-added industries for the state.
So how exactly is this anything but an All Alaska Gasline?
I appreciate your arguments, but you're missing one thing: no project is economical without an OUTSIDE market. If you could use all the gas in Alaska, it would be an "All-Alaska" project, but otherwise you're still dependent on forces beyond your control.
ReplyDeleteI love that one of the arguments in favor of the Valdez LNG idea is that if Alaska gas is piped into Canada, it will only end up in the oilsands. Well, if LNG ships to Kitimat, where do you think it will go?
The gas will most likely all go through Canada anyway, even with LNG, except with far higher operating costs and arguably higher environmental risk. Less margin on the gas means less tax $$$ to the state.
I'll grant that there would be more jobs in Valdez. But LNG is produced far more profitably in a number of places in the world, so I'd question the ultimate security of those jobs.
All of your other arguments apply just as easily to the TCPL line.