BP Amoco leader Sir John Browne says the British oil giant will consider taking an ownership role in a new natural gas pipeline to the North as the industry charges into the new energy frontier of North America.
In an interview Monday with the Herald, Browne said BP Amoco's Canadian affiliate is talking with industry players and pipeline companies about northern investment as it eyes future development in the Mackenzie Delta, Beaufort Sea and Alaska.
Browne's revelation came as delegates got down to business on Day 2 of the World Petroleum Congress and expected protests outside fizzled.
While no decision has been made, corporate heavyweights such as BP Amoco are seeking to remove the main obstacle to exploiting huge northern gas reserves -- lack of a pipeline to ship the resource to market. "Our cost of capital is such that if we find the right returns on a pipeline and are permitted to own it, we'd certainly consider doing that. Pipelines are not something that we shy away from as a matter of principle," said the company's chief executive.
"Within the decade, it looks as if the market is there to deliver gas from the North . . . . The issue is not an engineering issue. The issue is partly a cost issue -- at what gas price do we think it's the right risk level to take."
Given current red-hot prices for natural gas in North America, experts say the prospects for a northern pipeline -- estimated to cost $6 billion -- are bright.
Energy analyst John Mawdsley of FirstEnergy Capital Corp. in Calgary said BP's participation would send a message to the sector about the future of northern development.
At stake is access to a huge resource needed to fuel growing continental demand. The International Energy Agency predicts gas demand will jump six per cent annually for the next two decades. Canada's National Energy Board estimates nine trillion cubic feet (tcf) of gas has been discovered in the region and 55 tcf remains to be found.
Tapping into the huge gas reserves was sidetracked in the early 1980s due to regulatory matters, environmental concerns and First Nations land issues.
With rising gas prices, the sector is northward-bound; many of the earlier obstacles are expected to be resolved.
Several routes for a pipeline are being considered by the industry, including passage through the Northwest Territories, Yukon, or from Alaska into British Columbia.
BP Amoco Canada, the country's largest natural gas producer, has held discussions with a number of pipeline companies, but hasn't selected a favoured path south.
"There are different routes for the delivery of natural gas to the lower
48 (states), they all have to be looked at," Browne said. "The bottom line is they all end up in Alberta . . . it's the hub for everything."
Liquifying the gas is another option being studied but "that looks the least likely of all of them," he added.
In Alaska, BP's estimated reserves are as high as nine tcf of gas around the Prudhoe Bay oil basin.
In Canada, the energy giant has almost 90,000 acres in the Yukon and N.W.T., along with 155,000 acres of significant discovery licences -- area containing proven gas reserves -- in the Beaufort Sea.
However, observers note the Canadian petroleum industry charged down the same path two decades but was tripped up. In his 1977 report, Justice Thomas Berger argued there should be a 10-year moratorium on the development of pipelines in the Yukon and the Northwest Territories until native claims had been settled.
"Eventually that gas will come to market," said Imperial Oil CEO Bob Peterson, whose company is one of several Canadian firms studying Arctic gas development.
"I used to say it was seven or eight (years) away. That was 27 years ago. It's still seven or eight years away."