TransCanada Offers More Pipeline Details

In February TransCanada provided Alaska legislators with additional details on its pipeline plans. Its open season, which will take place from April 30 to July 30, will offer both a North Slope to Alberta option and a North Slope to Valdez option in which the pipeline would terminate at an LNG facility.

TransCanada told legislators that some shippers were interested in the LNG project. It also said that in the proposed overland pipeline plan, shippers would be allowed to divert their gas from the pipeline upstream from the Alberta hub.

Allowing shippers to use other Canadian pipelines has the potential to decrease Alaska’s revenue, since increased tariffs in Canada could diminish the overall value of North Slope gas.

TransCanada has offered this option in response to customer requests. Denali, the competing pipeline project from BP and ConocoPhillips, has been telling shippers they would not be locked into using TransCanada’s pipelines. The Denali project is not offering a Valdez pipeline option.

TransCanada also said it was planning to shorten its minimum term for capacity commitments from 25 years to 20 years for companies that sign contracts early and to accept a 12 percent return on equity instead of the 14 percent previously specified.

The lower return on equity and the collection of only 80 percent of capital expenditures over the initial contract terms will amount to $500 million annually in reduced transportation costs for shippers, savings that will benefit Alaska in part because tax revenue will reflect those lower costs.

Details were also offered about a proposed 58-mile pipeline that would feed into the main pipeline from the Point Thomson gas and condensate field. That section would be designed to ship 1.1 billion cubic feet per day, which would represent almost one-quarter of the proposed main overland pipeline’s capacity. (The Valdez/LNG option would have a 3 bcf/d capacity.) An open question is the projected production volumes for Point Thomson, which could ultimately affect total pipeline volume and tariff amounts.

Estimated tariffs would be between $2.80 and $3.50 for the overland pipeline and between $2.45 and $3.15 for the LNG/Valdez alternative, reported the Alaska Journal of Commerce.

Return to March 2010 Western Energy News

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