The state of Alaska has taken the next step toward bringing its vast North Slope natural gas reserves to the North American energy market, as the governor released a draft contract outlining the basic agreement between the state and the consortium of oil companies involved in the project. The state would have a 20% ownership stake and contribute more than $4 billion to the $21-billion venture, while producers would contribute more than $16 billion. The pipeline would transport approximately 51.1 Tcf of natural gas over the anticipated 35-year operating life of the project. The draft is a 356-page document that outlines the contract between Alaska and BP, ConocoPhillips, and Exxon Mobil Corp. The project would require 54 million construction man-hours, and five to six million tons of steel. The project is expected to produce 4 Bcfd of gas per day from Prudhoe Bay, Point Thomson and other western North Slope fields. The contracts elements include gas transmission pipelines; a gas treatment plant; a gas transportation mainline; a natural gas liquids processing plant; an Alaska-to-Alberta project; and an “Alberta-to-Lower 48 Project” that could export gas from Alberta, Canada, to the contiguous United States. Following a public review process, the Legislature must approve the fiscal contract. The producers can begin project planning after legislative authorization.

Canadian crude comes to Gulf Coast
Mobil Pipe Line Company (MPLCO), an affiliate of ExxonMobil Pipeline Company, has started delivering Canadian crude to the U.S. Gulf Coast through an 858-mi crude oil pipeline that runs from Patoka, Illinois to Nederland, Texas. Deliveries to Beaumont, Texas-area refineries began in early April. The project reversed an 858-mi, 20-in. MPLCO crude oil pipeline that had historically run south-to-north from Nederland, Texas, to Patoka, Illinois. The 648-mi segment from Patoka to Corsicana, Texas, had been idle for several years, while the 210-mi segment from Corsicana to Nederland had been moving predominantly foreign crude north to markets in North Texas and Oklahoma. A first for the U.S. Gulf Coast region and Canadian crude producers, the successful completion of the 20-in. Pipeline Reversal Project gives shippers of western Canadian crude oil direct pipeline access to U.S. Gulf Coast refining markets. It also allows MPLCO to optimize a previously under-utilized pipeline to best advantage. One ExxonMobil Pipeline Co. official noted that Canadian shippers have committed an average volume of 50,000 bpd for the next five years, and adds that the company anticipates that the pipeline will operate on average near its estimated capacity of 66,000 bpd in heavy crude service.

South American presidents affirm plan
The governments of Brazil, Venezuela, and Argentina have reaffirmed their intention to jointly build the proposed Gasoducto del Sur pipeline, which would move natural gas from Venezuela through Brazil and on to Argentina. The presidents of the three countries – Venezuela’s Hugo Chavez, Argentina’s Nestor Kirchner, and Brazil’s Luiz Inacio Lula da Silva – met in Sao Paulo, Brazil, in April to discuss the project and its commercial integration. The pipeline would run some 8,000-10,000 km, and is initially budgeted at approximately (U.S.) $25 billion. It is projected to carry as much as 150 million cubic meters a day of Venezuelan gas, with the first phase set to begin operations in 2009. The idea is to link the largest natural gas reserves in South America, which are in Venezuela and Bolivia, to build a natural gas ring. In May, Chavez announced that Bolivia had agreed to join the project, after a meeting of the four countries’ leaders in the Argentine border town of Puerto Iguazu. The presidents also reaffirmed that a draft project will be ready in June, and discussions are taking place to decide on the pipeline route. The project would be financed by governments, state-owned companies, and private companies. Preliminary feasibility studies are underway, and an initial outline of the project should be concluded in June. Chavez said the next meeting, which will include Bolivia, will be in Venezuela.

Norway sees rising gas exports
Norway, one of Europe’s biggest natural gas providers, is set to increase supplies to its European neighbors by about 40% within two years, says Norwegian oil minister Odd Roger Enoksen. Norway will be raising its exports to Europe from about 85 billion cubic meters (annually) to about 120 billion cubic meters within two years. The development comes as European policymakers are expressing concern about the reliability of Russian gas exports. Enoksen said production from two of Norway’s biggest gas projects, Snohvit and Ormen Lange, would drive the increased exports, which will involve liquefied natural gas and gas shipped via pipelines. Gas from the Ormen Lange project in particular will be sent via pipeline to the U.K., and account for 15% to 20% of its daily gas demand.

BP shuts down two North Slope Pipelines
BP reports that it is shutting down two North Slope oil pipelines because of internal corrosion damage, halting the flow of 22,000 barrels of crude daily. The shutdown follows the March 2 closure of a major Prudhoe Bay oil field pipeline that sprang a leak and spilled an estimated 201,000 gallons, or 4,790 barrels, of oil. Corrosion was blamed for eating a hole through the inner pipe wall, leading to the largest oil spill ever on the Slope. The leak, which has drawn scrutiny from federal pipeline regulators, members of Congress and criminal investigators, prompted BP to conduct a flurry of extra inspections in the vast pipeline web across the North Slope oil fields. However, those inspections were not what led to discovery of corrosion problems in the two additional pipelines BP is shutting down, said Maureen Johnson, a BP senior vice president. Rather, it was BP’s regular, long-term corrosion monitoring along the two pipes, each of which has well-documented corrosion problems and had deteriorated despite aggressive and expensive chemical treatments that add a protective coating to the steel pipe inner walls. One of the damaged pipelines is in the Lisburne oil field, which BP runs on behalf of itself and other owners including ExxonMobil and ConocoPhillips. The line is 24-in. in diameter, is nearly five miles long and carries 20,000 barrels of oil per day, said BP spokesman Daren Beaudo. The other pipe is in BP’s Milne Point field, and is 14-in. in diameter, nearly 3.5-mi long, and carries 2,000 barrels of oil a day. Neither pipe leaked any oil, Johnson said. The Lisburne and Milne Point pipelines carry oil from wells toward processing plants that remove water and natural gas that come out of the ground mixed with the crude. The oil outage represents a small fraction of total North Slope production of about 825,000 barrels a day. BP says it plans to test the lines to see if they can be safely operated pending permanent repair or replacement decisions. The pipeline leak discovered March 2 in the giant Prudhoe Bay field, which BP also operates, involved a 34-inch pipeline and a production loss of up to 100,000 barrels of oil per day. That pipeline remains shut down, but BP is using a bypass pipeline to restore 85,000 barrels of the lost production.