Transcript Joint Team Objectives

Overview & Status for:
International Association of Energy
Economists
Alaska Chapter
October 25, 2001
Anchorage, Alaska
Team Objectives
• Assess the economic viability of a pipeline project
• Focus on route evaluation
– Cost and environmental considerations
• Prepare sufficient information to support potential permit
applications
Safe and Environmentally Responsible
September 2001
2
Alaska Gas Resources & Major Producers
Location Map
Milne
Point
Northstar
Endicott
Alpine Kuparuk
NPRA
Pt. Thomson
Liberty
Prudhoe
Bay
Badami
Coastal
Plain
(1002 Area)
Developments
Major Discoveries
LJL (April, 1997)
0
5
10
15
20
25
ANWR
Miles
• North Slope discovered resource = 35 Tcf
• Prudhoe Bay – 8 Bcf/d of production,
currently reinjected into reservoir
• Ultimate ANS resource estimates ~100 Tcf
September 2001
3
Alaska Gas Owners
Others
State
BP
Phillips
ExxonMobil
Preliminary Comparison of Two Pipeline Routes
Southern Route
Northern Route
2,139miles
1,803miles
Pipeline Design Basis
Diameter 52”
High pressure 2,500 psi
Buried line
Throughput 4-6 bcf/d
Note: Mackenzie Valley Pipeline
September 2001
1,140miles
4
Route Attribute Elements
1. Economics
2. Revenues
3. Gas Access
4. Jobs
5. Environment
6. Safety
7. Timing
September 2001
5
Element 1: Economics
Neither Route Is Economic
Total Project Cost ($bn)
(4.0bcf/d from Alaska, 0.8bcf/d from MD)
Gas Treatment Plant
Alaska to Alberta
Alberta to Market
NGL Extraction Facilities
Alaska Project Total
Mackenzie Delta Line
Pt.Thomson Development
South
2.6
9.0
5.3
0.3
17.2
North
2.7
6.8
5.3
0.3
15.1
2.3
1.3
0.9
1.3
Notional Toll ($/mcf)
(Alaska North Slope to US L-48 Market)
Gas Treatment Plant
Alaska to Alberta
Alberta to Market
Total
All number in US dollars
September 2001
South
0.30
1.31
0.78
2.39
North
0.32
0.97
0.78
2.07
Price Assumptions
• Based after EIA, ~$3.00/mmbtu, escalating with inflation.
• View 2000 price spike as an anomaly.
Project Discounted Cumulative Cash Flows
($bn) (at 15% discount rate)
10.0
8.0
North
6.0
South
4.0
2.0
0
North
-2.0
South
-4.0
-6.0
-8.0
EIA Price Scenario
-10.0
2000 2005 2010 2015 2020 2025 2030 2035 2040
Total Governments*
Owners
* Includes Mackenzie Delta Benefits
• Owner’s investment not repaid.
• Additional risk from price and cost uncertainty.
• Team is still working to improve economics by lowering
costs.
6
Element 1: Economics
Gas Price History and Forecast
Henry Hub Gas Price ($/mmbtu)
10.00
9.00
8.00
7.00
Average ‘00-‘01
$4.09/mmbtu
6.00
5.00
4.00
Average ‘90-‘95
$1.80/mmbtu
Based after EIA, 2001
3.00
2.00
Average ‘96-‘99
$2.27/mmbtu
1.00
0.00
1990
1993
•
•
•
•
September 2001
1996
1999
2002
2005
2008
Demand growth encouraging
Highly volatile commodity
Intense market competition
Successful project must have competitive cost of supply
7
2011
2014
Element 2: Revenues
Substantial Government Revenues Regardless of Route
Total Undiscounted Revenue
Total Undiscounted Revenue
South
$66.2bn, MoD
North
$68.0bn, MoD
Canada Federal
$11.2bn
Canadian Provinces
$6.9bn
US Federal
$23.7bn
Canada Federal
$11.3bn
State of Alaska
$22.7bn
Canadian Provinces
$6.7bn
US L-48 States
$1.7bn
US Federal
$24.2
Assumptions:
• Both routes include MD upstream and midstream revenues.
September 2001
State of Alaska
$24.1bn
8
US L-48 States
$1.7bn
Element 2: Revenues
State of Alaska Revenues
Total State of Alaska Revenues
Difference in Alaska State Revenues
North vs. South
25.0
Delta Cum. Revenues ($bn, MoD)
Total Revenues ($bn, MoD)
4.0
Income Tax
20.0
Ad Valorem Tax
15.0
Severance Tax
10.0
5.0
Royalty
0.0
South
September 2001
3.5
3.0
2.5
2.0
1.5
1.0
Current Project
0.5
0
North
0
20
40
60
80
100
ANS Developed Reserves (Tcf)
9
120
U.S. Regulatory Enabling Legislation
•
Creates market-driven, expedited regulatory process for any viable
project(s)
– Subject to FERC regulation; fair and reasonable terms and
conditions; open access
– Subject to all environmental laws and regulations; 18 month EIS
completion
•
Producer participation in Senate Energy Committee testimony on
October 2
•
Senate Energy Bill now going straight to floor
– Language developed by producers in current mark up
•
Creates best possible structure for successful Alaska Pipeline Project
September 2001
10
Way Forward
• Feasibility study underway – expect engineering to be
completed by year-end.
• Update of project economics / route attribution comparison to
follow
• Then open season decision to be made:
– Project economic?
– Enabling legislation been enacted?
– State fiscal certainty progressed?
– Route selected?
September 2001
11