Alaskan Gas to China?

Those segments of the US beholden to both big business and America-firstness have a big conundrum looming on the horizon: what to do with the natural gas supplies waiting to be developed on the Alaskan North Slope.

TransCanada and ExxonMobil have filed their plans to seek shippers with the US Federal Energy Regulatory Commission and also have permitting in hand from both the state of Alaska and the Canadian federal government to build a pipeline moving ANS gas south. BP and ConocoPhillips have a second consortium also figuring out how to best tranport Alaska’s gas reserves.

Balance

Both consortia have developed plans to build a pipeline to or through Alberta, ultimately delivering our precious resources directly to consuming centers in the US midwest and northeast. Such a line would cost $30-43 billion, traverse 1,700-2,000 miles, and transport roughly 4.5 bcfd of natural gas to the lower 48.

But the TransCanada-ExxonMobil proposal contains a second option: a $26 billion, 800-mile line transporting 3 bcfd from ANS to Valdez, where it would be converted to LNG by a plant yet to be built and, most likely, exported. This is where things get interesting….

Why ‘most likely exported’ you might ask. Well, aside from Jones Act restrictions limiting shipment between US ports to US-built and flagged vessels, it’s because more money will likely be made selling natural gas to China than selling it here. But it’s OUR gas, the isolationists will shriek.

Take that up with your big business keepers. In the meantime, allow me to lay out some facts and figures…you know, the kind of stuff we only like (hell, even recognize as existing) if it helps our argument.

We’ve got a new resource down here called shale gas. Lots of people are excited because suddenly the US has bigger natural gas reserves than any other country in the world. That’s no bad thing (unless you’re part of the coal lobby), but it creates some problems regarding the viability of moving ANS gas south for domestic use. 

Or does it? The US Energy Information Administration places lower-48 recoverable natural gas reserves at 347 tcf. Even at projected 2020 production rates of 20.04 tcf/year that’s only 17 years worth of supply, even less if one uses current (higher) production rates. Given a project in-service date for an Alaskan gas pipeline of 2020-2023, such supplies would be starting to arrive just as shale gas was starting to taper off.

Worries that the bulk of Alaskan gas won’t even get that far south, instead being consumed in the hugely energy intensive process of treating Alberta’s oil sands, are also suspect. Even with a more-than-doubling of Canadian bitumen production over the next 10 years to at least 3 million b/d, the Canadian Energy Resource Conservation Board expects the country’s domestic gas consumption to equal just 50% of production. They still won’t even be using all their own gas, much less sucking down all of Alaska’s

So where’s the bogeyman? Over the Pacific horizon. The EIA predicts China will meet more than one-third of its gas demand in 2030 through imports. It also predicts China’s consumption will grow from roughly 2 tcf in 2006 to roughly 7 tcf in 2030, requiring total imports of roughly 2.5 tcf.

Still a pretty small number compared to US figures, right? Yes, until you look at consumption in non-OECD Asia as a whole rising from 9.4 tcf  to 24.5 tcf over the same period. Production in the region also goes up. But by only 8.8 tcf. With 2.2 tcf of this occuring in China.

In the meantime, the agency sees US natural gas consumption as increasing by just 1.61 tcf between 2008 and 2035. I leave it to you to guess where the highest prices buyers will likely be….

So maximizing revenues pulls ANS gas to Asia. And big business likes nothing more than maximizing revenues. But again, it’s OUR gas. It was put there by God for the US to use. We can’t sell it too a bunch of foreigners.

Awww hell man, chill out. You know what they say: Money talks, bullshit walks. Oh snap! Who’s got all the money these days?? Our creditors. Well, Uncle Sam will save us, right? Yeah man, mos def. But only by artificially inflating the price we pay so his master ends up happy. And isn’t government interference a bad thing anyway?

Damn, this shit is tough….

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