# Presentation: 243230

## THE NORTH AMERICAN FRONTIER: 

**ARCTIC GAS AND MORE**

**Roland R. George**
**Principal**
**rrgeorge@purvingertz.com**
**www.purvingertz.com**

**NEMS/AEO 2001 Conference**
**Washington – March 27, 2001**

## Objective of the Presentation

- “To present Purvin & Gertz’ latest views
- on Alaska North Slope and Mackenzie
- Delta/Beaufort Sea natural gas supply.
- The resource potential will be examined
- and put in context of the market.
-  Some strategic considerations will
-  be highlighted.”

## Outline of the Presentation

**Objective of the Presentation**
**Overview of Upstream and Outlook**
**Findings on Arctic Gas **
**Summary and Conclusions**

**OVERVIEW OF UPSTREAM AND OUTLOOK**

## The Upstream Industry in Perspective

**North America: largest gas market in world and strong growth outlook**
**Technical and cost efficiency gains mean increased competitiveness for gas**
**Major supply potential still exists in conventional areas as well as in frontier areas**
**Some areas are reaching maturity; so what’s the next new major increment of supply?  The Arctic!**

## Natural Gas Pricing (Current Dollars)

**Current $U.S./MMBtu**

**Henry Hub**

**AECO**

## Technically Recoverable Resources (TCF)

| U.S. Natural Gas Resource |  |
| --- | --- |
| Nonass. Undiscovered | 319 |
| Nonass. Inferred | 244 |
| Unconventional | 393 |
| Associated | 129 |
| Alaska Proved | 33 |
| Proved Reserves | 164 |
|   Total Natural Gas | 1,281 |

**Source: EIA Assumptions to Annual Energy Outlook 2001.**

## Other Resource Estimates (TCF)

| NPC (Total Remaining Gas Resources) |  |
| --- | --- |
| Lower 48 | 1,466 |
| Alaska | 322 |
| Canada | 667 |

| Potential Gas Committee (Gas Resources)       |  |
| --- | --- |
| Lower 48 (probable, possible, speculative) | 702 |
| Alaska | 194 |
| Coal-bed methane | 141 |
|  | 1,037 |

## Potential Gas Resource (TCF)

|  | Remaining 
Discovered | Undiscovered Resource | Total
Remaining
Potential |
| --- | --- | --- | --- |
| Canada(1) | 95 | 535 | 630 |
| Lower 48 | 411 | 1137 | 1548 |

**Source: NEB, Supply and Demand to 2025.**
**Note: (1) Mackenzie/Beaufort: 9 TCF discovered, 55 TCF undiscovered**

## Why is ANS and Mackenzie Delta Gas Next?

**“****Out-of-bounds” gas****(e.g. offshore B.C., California, Florida)                                                        **
**Too far, too speculative****(e.g. Arctic Islands)**
**Mexico (upstream closed)**
**LNG (niche only)**
**Coal-bed methane (maybe)**

## Incremental Lower 48 Supply * - BCF/D

**Mountain**
**2010:   4.0 **
**2020: 11.9**

**TX/LA**
**2010: 8.0 **
**2020: 8.2**

**Other Lower 48**
**2010: -0.2**
**2020:  0.1**

**Note: * Compared to 2000**

**Net Imports from Canada**
**2010: 3.4 **
**2020: 5.7**

**Net Exports to Mexico **
**2010: 0.8 **
**2020: 0.7**

**Other Net Imports**
**2010: 0.2**
**2020: 0.6 **

**FINDINGS ON ARCTIC GAS**

## Current Drivers for Arctic Gas Development

**Current Drivers for Arctic Gas Development**

**Concerns over current and future gas supply with consequent increase in price**
**Strong long-term gas demand outlook**
**Drive to monetize stranded gas assets with impressive and economic potential**
**Strong stakeholder support**

## Northern Areas of Recent or Potential Interest

**Prudhoe Bay**

**Mackenzie Delta/**
**Beaufort Sea**

**Cook Inlet**

**Colville Lake**

**Cameron Hills**

**Liard Plateau**

**Norman Wells**

**Eagle Plains**

**Peel Plateau**

**Other Onshore**

**Other Offshore**

**U.S. Beaufort**

**U.S. Chukchi**

## Alaskan Gas Development Options

**North Slope (Pipe, GTL) **

**Mackenzie Delta**

**(LNG/**
**GTL)**

**6**

**5**

**1**

**3**

**4**

**2**

**2**

**1**

**Mackenzie River Valley Route**

**LEGEND**

**South Shore**

**Proposed Pipelines**
**Existing Pipelines**

**TransAlaska Route**

**Alaska Highway Route**

**Beaufort Subsea Route**

**Dempster/Klondike Highway**

**Porcupine River Route**

**1**

**2**

**3**

**4**

**5**

**6**

## General Conclusions from Purvin & Gertz’ Studies

**ANS and Mackenzie Delta gas could be developed within a decade**
**Henry Hub price of less than 3.00 $/MMBtu (constant 2001$) could be adequate to develop discovered resources  if most economic development option chosen**
**Project costs and market prices are the greatest quantifiable risk factors**

## Show Stoppers?

**Potential show stoppers on the political, economic, social, technological, environmental, and regulatory fronts will likely all be overcome**
**Except maybe for the subsea route**

## How Will Development Play Itself Out?

**“****The Big Y Solution”**
**“****The Shortest Route Scenario”**
**“****The Alaska Advantage Scenario”**
**Variations on a theme – competitive or synergistic development**

**SUMMARY AND CONCLUSIONS**

## Summary and Conclusions

**Strong gas demand growth will be satisfied by conventional and increasingly by frontier supply**
**Arctic gas is the next major increment of supply and will require major upstream investments**
**Arctic gas pipelines and takeaway capacity out of Western Canada represent major business and investment opportunities**

## .

**I****NTERNATIONAL**** E****NERGY**** C****ONSULTANTS**
**www.purvingertz.com**

**“****Purvin & Gertz is an independent, employee **
**owned, international energy consulting firm**
**providing sound and objective strategic, commercial,**
**and technical advise to the energy sector.”**