Gas line price tag now must include security, study group reports

ANCHORAGE -- Gas companies studying a proposed natural gas pipeline from the North Slope to the Lower 48 say the line could cost more than their initial estimates, in part because of security concerns after the Sept. 11 terrorist attacks.

The line, which would tap North America’s largest undeveloped gas reserves, is estimated to cost $15 billion to $20 billion.

Nailing down a precise cost is the target of a $100 million study expected to be completed by the end of the month.

BP, ExxonMobil Production Co. and Phillips Alaska Inc., owners of most of the North Slope’s proven gas reserves of 35 trillion cubic feet, teamed up to look at what the project will cost. They are also looking at which route would be most economical; one that would follow the Alaska Highway or one that would run under the Beaufort Sea and across the Canadian Arctic.

On Dec. 13, Curtis Thayer, spokesman for the joint study group, said security along the proposed line became a concern after Sept. 11, particularly for the more exposed highway route.

"Having a pipeline along a highway presents security issues,’’ Thayer said, "and that is going to cost a little more.’’

Most of the line would be buried, but it would bridge some streams.

This fall, the owners of the 800-mile trans-Alaska oil pipeline learned just how vulnerable their line was when a man shot it with a rifle. It took workers about 36 hours to stop the leak, which amounted to almost 300,000 gallons.

Security is not as big a concern with a gas line across the isolated Beaufort Sea. But for other reasons, the cost of that route might be more expensive than first thought.

Last August, the price was estimated at $15.1 billion, about $2 billion less than the highway route. Crews were still surveying the Beaufort route during the estimate.

Surveying is now completed, and the companies have a better idea how much it would cost. Thayer declined to say whether the price will increase, but acknowledged that building a line underneath the sea has environmental challenges that could drive up costs.

Preliminary analysis already shows that neither route would be as profitable as the companies want. The companies based their study on earning at least a 15 percent profit, but September estimates found the return would be in the range of 12 percent to 13 percent, he said.

12/23/2001 - 8:00pm