Monday January 8, 12:37 pm Eastern Time

2 Arctic gas lines said needed to meet U.S. demand By Dann Rogers

CALGARY, Jan 8 (Reuters) - The growing natural gas crisis in North America will result in two new pipelines being built to connect Arctic reserves to existing lines in northern Alberta instead of just one, analysts said on Monday.

Gas shortages, which have led to record home heating bills and power outages, have refocused industry efforts to tap into known reserves on Alaska's North Slope and the Mackenzie Delta in Canada's Northwest Territories.

U.S. benchmark gas prices rose 45 cents on Monday to $9.73 per million British thermal units, almost quadruple year-earlier levels.

Two groups of companies, one in Canada and one in the United States, are studying the feasibility of transporting gas to the lower 48 states and are expected to announce their decisions later this year.

Previously, industry observers had suggested only one pipeline would be built.

But analysts now say a pre-Christmas announcement by BP Amoco (quote from Yahoo! UK & Ireland: BP.L) that it will explore for gas in Canada's Mackenzie Delta means two new Arctic lines are in the works.

BP Amoco, like Exxon Mobil Corp. (NYSE:XOM - news), is now a major leaseholder on Alaska's North Slope and the Mackenzie Delta.

``With that announcement, BP is playing both sides of the border, so they obviously believe there will be two pipelines,'' said Tom Ebbern, analyst with Newcrest Capital Corp.

``We see the Alaska Highway line being fast-tracked - even though it is more expensive - because there will be a huge cry for energy security in the U.S. and gas is the only thing the Americans have to play.''

Currently, some 8 billion cubic feet a day of gas is being re-injected into Alaskan North Slope oil wells because there is no pipeline traversing Canada's far north to connect with existing systems in Alberta and British Columbia.

Ebbern estimated the Alaska line could be onstream by 2005, while a line to the Mackenzie Delta could be commissioned two to five years after that.

Tim Holt, president of BP Amoco's Canadian arm, agrees. He said gas producers should work toward formulating a development plan for the entire region in the face of forecasts showing gas demand could outstrip supplies from traditional sources by as much as 4 billion cubic feet a day within a decade.

Another proposal that would see an undersea pipeline connecting Alaskan reserves to the Mackenzie Delta and then heading south through Canada won't proceed because of the political implications, said another analyst.

``The politics are already in play here and there are going to be two pipelines because of the politics,'' said John Mawdsley of FirstEnergy Capital Corp.

``Exxon and BP know it's not the most economic way to go, but they have to please Alaska, its natives, the U.S. federal government, Canada and the natives in the Northwest Territories.''

A spokesman for Canada's Imperial Oil Ltd. (Toronto:IMO.TO - news), which is 70- percent-owned by Exxon Mobil, said his company has launched a study to evaluate the feasibility of developing onshore Mackenzie Valley natural gas only.

``Can the North American market take two Arctic pipelines?'' said Hart Searle. ``We're trying to figure that out, but we don't know at this point.''

($1 equals $1.50 Canadian)

http://biz.yahoo.com/rf/010108/n08289073.html

-- Martin Thompson (mthom1927@aol.com), January 08, 2001

Answers

The natural gas situation is so desperate that I don't know how we can do without these lines.

-- JackW (jpayne@webtv.net), January 08, 2001.

Hey Jack

Where you been? Thought maybe you has kicked the bucket or something.

Welcome back.

Martin

-- Martin Thompson (mthom1927@aol.com), January 08, 2001.