By Tim Bradner
Alaska Journal of Commerce

Enstar Natural Gas Co. has launched its first phase of development planning for a 690-mile “bullet” gas pipeline from the North Slope foothills to Southcentral Alaska.

The Anchorage-based gas utility will spend $6 million to $9 million this year to do preliminary planning and develop cost estimates, Enstar spokesman Curtis Thayer said. The work would be complete by next February.

Enstar's pipeline would connect with what the utility hopes will be a potential commercial gas development by Anadarko Petroleum Corp. and its partners, BG Energy and PetroCanada, at the Gubik gas discovery, on the North Slope, 70 miles west of the trans-Alaska oil pipeline, said Thayer. There are no plans now to connect the pipeline with the Prudhoe Bay field, he said.

Enstar would make a decision on whether to proceed further with the project in June 2009, after Anadarko completes further testing at Gubik next winter. Thayer said the next phase of the project will likely cost $60 million.

Anadarko drilled a well and tested gas production earlier this year and plans more drilling next winter. Company spokesman Mark Hanley would not comment on results of the first production test. Gas was discovered at Gubik in the early 1960s but the discovery was believed then to be small and non-commercial.

Thayer said Enstar's plan for a 20-inch or 24-inch pipeline, to operate at a design pressure of 2,500 pounds per square inch, would require a $3.3 billion investment and would require about 3 trillion cubic feet of gas reserves at Gubik or any new gas discoveries in the area. Anadarko also plans to explore a second nearby prospect, Chandalar, which has not been previously drilled.

There could be other gas made available to Enstar's pipeline because it would follow a route near gas-prone areas of the Yukon Flats and the Nenana Basin in Interior Alaska, which would boost exploration in those areas.

Thayer said Enstar and Anadarko have held preliminary discussions for a smaller-diameter pipeline that could be built faster than the 48-inch to 52-inch large pipeline from Prudhoe Bay that is being considered, and which could not be in operation until 2018 or later. The companies are now working on a preliminary agreement for sharing of information, which hopefully will be signed within the next few weeks, Thayer said.

The goal for completion of a “bullet line” is 2015, coinciding with a drop in contracted gas supplies to Enstar from its existing suppliers in Southcentral Alaska, Thayer said. Reserves are declining in existing gas fields in the Cook Inlet Basin near Anchorage.

“We need gas sooner than it could be provided through the big pipeline,” Thayer said. Even if two pending new gas supply contracts are approved by the Regulatory Commission of Alaska later this year, Enstar is likely to face a gas supply shortfall of from 10 billion cubic feet in 2015 to 15 billion cubic feet by 2019.

The success of the project also depends on whether there is an industrial customer for gas other than Enstar and electric utilities in Southcentral and Interior Alaska. Agrium Corp. has closed down its fertilizer plant near Nikiski, which used gas as a chemical feedstock, but Thayer said Agrium had recently contacted Enstar to express interest in buying gas and possibly restarting the plant.

ConocoPhillips and Marathon Oil own a gas liquefaction plant also at Nikiski. The federal LNG export license for the plant expires in 2009 but could be extended until 2011. Plant owners have not said whether they will apply for a further extension, but Thayer said other potential industrial customers have expressed interest in North Slope gas, including one firm hoping to develop a barge-mounted, floating LNG plant.

Meanwhile, North Slope producers working on a large-diameter pipeline are being supportive of Enstar's efforts, Thayer said. They are offering to assist and share technical data on constricted points where the two pipelines would be located in close proximity, such as Atigun Pass and the Yukon River Bridge.

Unlike the larger pipeline, Enstar's pipeline would most likely carry “dry” natural gas, mostly methane, and without natural gas liquids, because Anadarko believes Gubik and potential nearby deposits contain dry gas. In contrast, gas in the Prudhoe Bay and Point Thomson fields is “wet” with substantial quantities of gas liquids like propane, ethane and butane, as well as condensate at Point Thomson.

Enstar's pipeline would be designed to operate at 2,500 psi pressure, so that compression could be added to ship larger quantities of gas if it is available.

Contractors now working with Enstar on the project include, among others, Michael Baker Jr., Inc.'s ASRC Energy Services' Aerometric Inc.; Geotechnical Experts; and Hydraulic/Process Experts.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.