Funneling Alaskan natural gas to Chicago in a 3,500-mile-long pipe would benefit area customers and manufacturers, observers say.
Two of the world's largest oil companies — Britain's BP PLC and ConocoPhillips in Houston — unveiled plans to jointly develop a multibillion-dollar natural gas pipeline. Anchored in Alaska's energy-rich North Slope, it would ship natural gas to U.S. markets to power homes and business.
Chicago could be the southern terminal of the 3,500-mile pipeline.
Tapping new stocks of natural gas in Alaska would help to lower prices in the Chicago area, one of the nation’s largest gas markets.
The more supply you have, the lower the cost,” said Phil Flynn, a senior trader at Chicago-based Alaron Trading Corp. “If that gas comes to Chicago, it’s going to keep prices lower.”
The Alaska gas pipeline has been the “holy grail” of the energy industry for 30 years, said Mr. Flynn. Several companies have taken a crack at building the line.
But the project’s enormous cost has kept them from moving forward with actual construction. Ironically, it’s record high oil and gas prices in recent years that has rekindled interest in piping gas from northern Alaska.
"Thanks to high prices, it’s starting to make sense now,” said Mr. Flynn.
BP and ConocoPhillips said they plan to spend $600 million in the first phase of the project over the next three years, beginning this summer. The project's cost estimates exceed $30 billion.
Construction of the line could be a boon to pipe and construction equipment manufacturers, such as Peoria-based Caterpillar Inc., already a major supplier of equipment and power generators to the energy sector. Pipe maker Ipsco Inc. would likely be one of the suppliers of the 52-inch-diameter pipe anticipated for the project. Russia’s Evraz Group S.A. is attempting to acquire Lisle-based Ipsco’s pipe making operations for $4 billion.
The project also has long-term implications to North America's energy needs by potentially helping homeowners and business owners with soaring heating and fuel costs in years to come.
"This is not an announcement to build a plan; this is an announcement to start the project," said Doug Suttles, president of BP Exploration Alaska Inc. "Before the year is out, we will have over 150 people working on it. What I would say is, 'Watch, just watch.'"
No timeline was announced for construction and completion, but the companies have said it would be at least 10 years before gas begins to flow.
The pipeline would eventually move about 4 billion cubic feet of natural gas per day to markets, about 6 percent to 8 percent of daily U.S. consumption, the companies said.
Interest comes at a time when natural gas has become an increasingly valuable source of energy, with U.S. natural gas demand growing about 1.5 percent a year for two decades since 1986.
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