In an attempt to compare alternative futures for Alaska on an apples-to-apples basis, this page will start carrying, on a trial basis, weekday comparisons of the netback value of Alaska oil (generally, the starting value used for royalty and tax purposes) and an approximation of what the netback value of Alaska gas would be under AGIA, expressed on a barrel of oil equivalent basis.
This is somewhat similar to the information currently being posted with some regularity by the Alaska House Majority on Twitter, at http://twitter.com/houmaj, but the effort on this page will be focused on reporting the prices on an apples-to-apples basis using “barrel of oil equivalent” as a common measure and using criteria for gas that attempts to create a netback to the Alaska North Slope, rather than, as the House Majority reporting does, focusing on the Henry Hub price.
The netback value of oil will be taken from the daily reported price for Alaska crude (the same as used by the AK House Majority), net of transportation costs included in Department of Revenue’s semi-annual reports and forecasts. The netback value of gas will be taken from the daily reported price for gas at the same Canadian Hub to which TransCanada’s AGIA line proposes to deliver Alaska gas, net of the transportation cost proposed as part of TransCanada’s Open Season plan. (Currently, the netback value is negative, and will be reported as a loss which would be borne by TransCanada’s shippers.)
In the near future, this page also, again on a trial basis, will begin reporting an approximation of what the netback value would be of pursuing the Valdez LNG option. The objective of that effort will be to estimate what the landed LNG price in Pacific Rim markets likely would be for Valdez LNG, and then to net the shipping, liquefaction and pipeline costs that would be incurred in delivering that gas to market.
The purpose of this effort is to provide some basis for comparing the alternative futures for Alaska from making further investments in oil v. gas. Some have suggested that gas can supplant oil as the engine for Alaska’s economic future. The data, to date, demonstrates that is not the case. See “Alaska’s Future: It’s the oil …,” Alaska Dispatch (Jul. 10, 2010). The purpose of this comparison will be to see how that comparison evolves over time.
Later this week this page will provide a detailed explanation of the calculations used to derive the values being reported. Until that is completed, it will just report the values.