Estimated cost of building the Alaska Natural Gas Transportation System from Prudhoe Bay to the lower 48 states has been cut by a whopping $11.5 billion, Salt Lake-based Northwest Alaskan Pipeline Co. reports.
Technological advances and an improved economic climate were among reasons cited for the dramatic reduction in cost estimates.V.L. Wolfe, Northwest's treasurer and controller, said the cost slashing means the project is now feasible and will create new jobs locally when the massive project begins gearing up in 1992-93.
The pipeline was conceived in the 1970s and a portion of it has been constructed, but the Alaska segment was put on indefinite hold in 1982 because of a poor economic climate and the glut of relatively cheap natural gas.
Even today, said Wolfe, the cost of moving gas through the line would not be economically competitive but company projections for the mid-1990s indicate they will be.
Capital costs for the project, expressed in Jan. 1, 1988, dollars, have been reduced 45 percent, from $26.1 billion to $14.6 billion, said Cuba Wadlington, Northwest's vice president for regulatory affairs.
He said the lower figure is the result of reassessing the project's design and ensuing re-estimates of capital costs.
The latest costs study was ordered last year by Northwest Alaskan, which is the operator for the Alaskan Northwest Natural Gas Transportation Co. partnership - sponsor of the Alaskan segment of the project - and Foothills Pipe Lines (Yukon} Ltd. - sponsor of the Canadian segment. The gas transportation system is the result of a 1977 "agreement on principles" between the United States and Canada.
Northwest Alaska spokesman Bill Moses said the discovery that pipelines could be built in the tundra in the Arctic winter had made for huge savings.
"Winter construction 15 years ago was thought to be impossible, now it's taken for granted," said Moses. "In the winter, you don't have to shut everything down. In fact, there's some real benefits to operating in the winter."
He said the project would be the largest in the non-communist world, tapping a field containing 26 trillion cubic feet of proved reserves.
Moses said 20,000 people would be employed on the Alaskan portion alone. He added that future provision had been made to tap into Canadian Arctic reserves with a planned link to the Mackenzie Delta along the so-called Dempster Highway.
According to Wadlington, the revised lower costs estimate was due to:
- Advances in pipeline design.
- Information gathered from extensive field testing programs conducted by the sponsors.
- Changes in the economic climate from the basis for estimates prepared in the late 1970s and early '80s.
Wadlington said reductions in capital costs could result in an estimated annual average transportation cost, in 1988 dollars, of $3.05 per million Btu's of energy to the lower 48 states over the first 10 years of operation - the figure Wolfe says will be competitive by the mid-'90s. Wadlington agrees.
"Northwest Alaskan Pipeline Co. believes that gas supplies on ANGTS will be required in the lower 48 states by the mid to late 1990s," Wadlington said. "The company is convinced that gas on the ANGTS system can be delivered at a market clearing price at that time."
He said the ANGTS system also appears promising because secured natural gas supplies could reduce national reliance on 400,000 to 600,000 barrels of imported oil per day.
Wadlington said the southern third of the system is now in service, delivering Canadian gas to U.S. markets. And the U.S.-Canada agreement along with enabling legislation and regulatory approvals are in place in both countries.
"Given the advanced status of the project, completion of the northern sections of the line could be undertaken in the most expeditious time frame possible," he said. About 2,100 miles of pipeline remain to be completed.
Northwest Alaskan Pipeline Co. is a unit of Northwest Energy Co., a subsidiary of The Williams Companies of Tulsa, Okla. Northwest Pipeline Co., also based in Salt Lake City, is also a unit of Northwest Energy but is not involved in the Alaska project.