AGIA Is Meeting Expectations … and more

The Parnell administration says the state’s gasline project is working as well as – or better than – intended.   A report sent to legislators over the weekend and made public this morning (Tuesday) says the working relationship between the state licensee, TransCanada,  and Exxon-Mobil has had a positive effect on the development of a plan that will go out to possible shippers in May.

The plan the state is following under the AGIA guidelines is ahead of schedule and ahead of spending projections – and it says that spending is generating data.  The administration’s gasline team has a positive take on the long-term prospects for marketing natural gas from the North Slope.   Gasline Coordinator Mark Myers reminded reporters that Alaska already has a significant investment in the project.

We committed $500-million to this project. We committed with state-specific goals and challenges for the licensee to meet,   We knew when it was passed, when it was ratified, when the legislature approved the license, we were on a ten-year journey.  It takes ten years to build a project like this and get to first gas.

Revenue Commissioner Pat Galvin focused on the parts of the report referring to the long-term prospects for Alaska gas in North American markets.  He said the AGIA project isn’t being driven by short-term economic conditions.   Instead, he sees natural gas as the key to the state’s revenue future.

Critics – most notably in recent weeks, former Governor Frank Murkowski – say that the state’s long term revenue future lies not in gas, but in the increased production of oil on the North Slope – saying the state needs to put more emphasis on increasing production and the load on the TransAlaska Pipeline to Valdez.  But Galvin disagrees.

The large prospects for production from the North Slope are going to be found on Federal Land and in Federal Waters where the state’s revenue is not as strong.  And so our focus on expanding the level of production of oil on the North Slope is not changing.

And Myers says gas production is essential to oil – together they will increase revenue more for each type of production.  He describes a synergy.  Much of the early gas production will come from oil fields – and having available a gas delivery system will open a new market that will encourage production of both oil and gas .

You look at the Prudhoe infrastructure and you look at the twenty billion barrels of heavy oil up there.  Not all of it is going to be economically recoverable by any stretch of the imagination.  But the longer the infrastructure can produce, the longer time we have to produce those resources, the longer we have to keep TAPS throughput at significant levels to be economic.  Gas helps immensely with that.

The first Open Season for the state-sanctioned gasline project is scheduled to run from  May first to July thirty first.  That will be another milestone – giving developers a look at how the project stacks up against other possible sources and providing a base for further negotiations.


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