New Report on Economics of Alaska Instate Gas Line

An article in today’s (February 9, 2011) Fairbanks News-Miner reports on a study by Roger Marks for the Office of Federal Coordinator, Alaska Natural Gas Transportation Projects.  The article, authored by Dermot Cole, is available here.

The lead paragraph does a good job summarizing the study’s conclusion:  “If the state wants to subsidize a gas pipeline, it could get far more benefit out of using its resources to help the economics of a large-scale pipeline instead of putting money in a small-diameter line from the North Slope to Anchorage.”  The full study is here.

My immediate reaction is that the study provides a good analysis as far as it goes.  However, the study necessarily accepts as a boundary that the instate line (due to provisions built into AGIA) is limited to 500 MMcf/d. If AGIA is terminated (as it should be), those limitations are eliminated and a different discussion around the instate line becomes possible.

Given that limitation, I would not rely at this point on some of the other conclusions contained in the study (for example, that hydro may be a preferable alternative for Southcentral) until the smoke clears on whether the 500 MMcf/d limitation is terminated.  If the limitation is terminated, the discussion around potential options will change.  Alaska shouldn’t lock into other alternatives until that fundamental issue is resolved.

One response to “New Report on Economics of Alaska Instate Gas Line

  1. AGIA is dead, Brad, you know that. Anything short of the pipeline to Valdez is a red herring.
    The reason the Producers do not want our gas to go to market is that they do not want Alaska NG competing with them in any market, including Asia.
    Conoco let the cat out of the bag with their income report: $12.84 for LNG from Nikkiski delivered in Japan. Kind of changes the economics for the all-Alaska natural gas pipeline.