Alaska North Slope and Canadian Arctic Gas
By Ralph Glass, Vice President Operations
Over the last week there have been many headlines on the movement to get the Alaskan North Slope and Canadian Arctic gas to market. It has been suggested in many prior AJM blogs that, as an alternative market for Canadian natural gas and specifically the Horn River volumes, producers should look to Kitimat on Canada’s west coast to access Asian markets. And now to further confuse the issue the Alaska North Slope natural gas consortium has introduced the possibility of an LNG export facility at Valdez Alaska as a means to get their natural gas to market.
The fundamentals of the North American natural gas markets have changed over the last two or three years with the advancement in technology that has unlocked previously un-producible reserves within the lower 48 states. Close to active markets, this volume increase has stretched storage levels to new maximums, effectively causing lower natural gas prices from the highs of prior years and the backing out of Canadian natural gas volumes from the US Markets.
Based on current trends and predicted potential, the Canadian Horn River and, in turn, the Alaskan North Slope natural gas will not be needed to feed the North American market for a very long time, if ever. Regarding LNG facilities, at Kitimat or Valdez and access to Asian markets, caution must be exercised as these would be in direct competition with recent LNG activity in Australia, which has the advantage of being much closer geographically to the Asian markets.
If the Alaskan North Slope or Horn River natural gas were to enter the North American market, the high storage levels and low prices will continue to dominate the industry. From the perspective of consumers and pipeline owners, lower prices are seen to be positive, but for the upstream natural gas producing sectors perspective, the economics would be marginal. This is the current case in Alberta where the natural gas industry is struggling to survive with low prices and limited market alternatives.
Should natural gas become the dominant clean energy of the future, replacing coal power generation, oil as a heating alternative, and maybe even having natural gas cars rather than electric cars, then the market for natural gas could be dramatically altered. These are big ifs and go against the direction of US coal and automotive industries. Whether North Americans have an appetite for change and the cost associated, is also in question.
In the 1970’s it was suggested that Arctic natural gas production was only a few years away from reality. Forty years later it is still not a viable alternative and I would suggest it will not be for another 20 to 30 years.
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