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Enron Mail |
Oil companies say North Slope gas pipeline too pricey
09/27/2001 Associated Press Newswires INDIA: State-run Indian firms don't want Enron's assets. 09/27/2001 Reuters English News Service The Hindu-Editorial: Muddying a quagmire 09/27/2001 The Hindu Wood Signals That El Paso's FR Contracts Are High on Agenda NGI's Daily Gas Price Index published : September 28, 2001 Williston Basin Interstate Pipeline Company Building New Pipeline 09/27/2001 Business Wire --------------------------------------------------------------- Oil companies say North Slope gas pipeline too pricey 09/27/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. ANCHORAGE (AP) - Oil companies looking into the feasibility of building a natural gas pipeline from Alaska's North Slope to the Lower 48 say the project is too pricey. A preliminary analysis of the proposed project by Exxon Mobil, BP and Phillips Petroleum shows that the pipeline project would not provide them with what they want; a 15 percent return on their money. The project works out to a 10 percent to 11 percent rate of return. "We see this as a very high risk project," Robbie Schilhab of Exxon Mobil told Gov. Tony Knowles' natural gas development team meeting this week in Anchorage. Schilhab and Phillips Petroleum's Joe Marushack presented their preliminary conclusions at a task force meeting. Whether the pipeline runs north through the Arctic Ocean to Canada's Mackenzie River delta or south along the Alaska Highway through Canada to the Lower 48, the answer is the same: for now, the project looks too expensive for Alaska's oil companies to undertake. For both the northern Arctic route and the southern Alaska Highway route, the costs would be huge: $15.1 billion for the offshore route and $17.2 billion for the highway route. "I think this could be made attractive to a number of investors," said Ken Thompson, a former oil company executive who sits on the governors' natural gas team. Thompson said that tax incentives, a lower return on investment and a higher value for liquid natural gas from the pipe would make the project a worthwhile investment. If the oil companies are not interested, natural gas transportation companies such as Williams, El Paso or Enron might be, Thompson said. Exxon, Phillips and BP are still refining their analysis of the project. But the two executives made clear that they consider the project a long shot both for its high costs and high risks. Schilhab said that opportunity remained to make the project an attractive investment by cutting construction costs. The companies also want to streamline the permitting process to avoid delays. The presentation dented but did not destroy the optimism of the governor's gas council. "I don't like seeing the number. But it's a lot different from saying no way, no how, we're shutting our doors and going home," said Pat Pourchot, state commissioner of natural resources. Pourchot said that the producers' position underlined the need for incentives like federal tax breaks similar to those being proposed by the Knowles administration. Exxon, BP and Phillips are split on the incentives. To address the risk of low prices, Phillips wants a tax credit if prices fall below a certain level. BP and Exxon say they want a project that is viable without tax breaks. Federal legislation is slated for consideration next week in Washington, D.C. INDIA: State-run Indian firms don't want Enron's assets. 09/27/2001 Reuters English News Service (C) Reuters Limited 2001. NEW DELHI, Sept 27 (Reuters) - Leading state-run firms have rejected proposals from financial institutions to acquire assets of U.S. energy firm Enron's Dabhol Power Co, officials said on Thursday. Enron wants to sell its 65-percent stake in Dabhol Power Co which is embroiled in a payments dispute with a local utility. Officials said some financial institutions had suggested National Thermal Power Corporation (NTPC), Oil and Natural Gas Corp and Gas Authority of India Ltd could buy the troubled Dabhol Power Co's assets. NTPC Chairman C.P. Jain told reporters the company had written to the federal government that it was not interested in the project. "We don't think it is a commercially viable proposition for the organisation." Officials said financial institutions had also proposed that ONGC and GAIL could buy the LNG import and regasification facilities of the Dabhol plant south of Bombay. ONGC Chairman Subir Raha said ONGC was not interested. "Right now it is not on our table. We are not considering it," he told reporters. Dabhol's first phase has a generating capacity of 740 MW. It has been idling since May when Maharashtra State Electricity Board (MSEB), its only customer, stopped buying power saying it was too costly and that Enron had violated a part of the contract. Dabhol's second phase was 97 percent complete when further construction was stopped because of the dispute. The first phase used naphtha as fuel, but the second phase, that will have a generating capacity of 1,444 MW, will use LNG as fuel. The Hindu-Editorial: Muddying a quagmire 09/27/2001 The Hindu Fin. Times Info Ltd-Asia Africa Intel Wire. The Hindu Copyright (C) 2001 Kasturi & Sons Ltd. All Rights Res'd ANY FAINT HOPES about the murky Dabhol Power Project crisis being sorted out by the contracting parties - the Enron Corporation, the Maharashtra State Electricity Board (MSEB), the State Government and the Centre which provided the sovereign guarantee in favour of Dabhol Power Company - now appear to have been ruined by the Maharashtra Government's resort to "the theatre of the absurd". The decision of the Vilasrao Deshmukh Government to have a judicial probe into the entire Enron deal abinitio is not a mere exercise in evasion of the responsibility of the State Government to strive for a process of renegotiation of the contract perceived to be loaded against the virtually bankrupt MSEB (which is unable to pay for power purchased from the Dabhol Plant-Phase I); what is involved is a brazen blackmailing strategy through which the State Government perhaps hopes to drive the Enron Corporation down to its knees to settle for an exit course at a substantial discount on its equity stake, estimated at $1.2 billion. The Centre is not blissfully unaware that its own obligation as a surety for the State Government is now seen as an empty promise with all its pervasive adverse image of the country as an undependable and vulnerable investment destination. The reported remark of the Union Minister for Power, Mr. Suresh Prabhu, that the new twist to the Enron tangle is "unfortunate" but that it would not affect foreign investments in the future, in the power sector in India, is indeed adding insult to injury. The script, as it is unfolding in the Enron muddle, can leave nobody in doubt that from the very beginning the contract has had a large element of political manipulation driving it. The allegation that the Enron Corporation was able to manoeuvre itself into a power purchase agreement which was decidedly exhorbitant in power tariff owing to the "padding" of capital cost and the denomination of tariffs in U.S. dollar terms (apart from the use of naptha as feedstock) is said to have been corroborated by the Madhav Godbole Renegotiation Committee set up by the State Government. Assuming that a whole chain of bureaucratic scrutiny from the Power Ministry at the Centre down to the MSEB, over a four-year period, did not unravel the odious features of the Enron contract, how does it exonerate the MSEB, the State Government and the Centre now, from non-compliance with the contract in its different stages? Political muck-raking, which is what is now being sought to be substituted by the Vilasrao Deshmukh Government (with the tacit approval of the Congress High Command) for an honourable modusvivendi on the Enron imbroglio, can never pass muster so long as the arbitration clause in the Enron contract cannot be wished away. It would indeed be a reckless misadventure for the Vajpayee Government to let the Maharashtra Government renege on the power purchase agreement with the Dabhol company and simply watch the disintegration of India's first-ever and much-vaunted mega power plant put up on the basis of foreign investment. Given the deplorable inadequacies in the power infrastructure in the country even after ten years of liberalisation and the demonstrated incapacity to add even 5000 MW of power generation capacity a year, it would be utter folly to abandon the Dabhol project without its full capacity of around 2000 MW being leveraged for the industrial advancement of the country. Reports indicate that the U.S.-based Enron Corporation has expressed a desire to quit from the Dabhol project. The Indian financial institutions which have a substantial exposure to the capital cost of the project cannot afford to wait in supplication for some miracle to happen for the Dabhol project to stay afloat. It is no less a challenge to them as to the Vajpayee Government to find a way out of the morass. Let the project be revived as an earnest of India's commitment to development rather than be rubbished as a monument of political corruption. NGI's Daily Gas Price Index published : September 28, 2001 Wood Signals That El Paso's FR Contracts Are High on Agenda FERC denied rehearing of a June order that permits Arizona Public Service Co. to assign its full-requirements (FR) capacity contract on El Paso Natural Gas to affiliate Pinnacle West Energy to serve a new gas-fired generation facility that it is building in Arizona. On the surface, it seemed a clear victory for the companies involved. However, Chairman Pat Wood made it very clear that he has concerns about FR service on El Paso, which entitles customers to unlimited capacity at frozen rates, and that he plans to take up the issue at a later date. "I will reluctantly go along with the order denying rehearing, but [I] look forward very aggressively to a forum in which we can address the capacity concerns" on El Paso, Wood said Wednesday during a marathon Commission meeting, the first over which he presided [CP01-90, RP00-336]. The proper forum for discussion of the FR service will be El Paso's Order 637 proceeding, he noted. As a lawyer, "it's hard for me...to find an excuse to grant rehearing here. Because this is not the appropriate docket to do that, I will concede that after four months of being browbeat into submission...that sometimes you ought to fold up," Wood said. "But I remain concerned about the [interplay] on the pipeline that if we don't engage in some long-term planning," the situation could "lead to a bedsore for the customers out there in the Southwest." The new chairman made clear that he was not "a fan or supporter of 10-year rate freezes or any extended rate freezes" that are made available to certain FR customers. "I understand that there's a tremendous disincentive here because of that for needed expansions to occur," Wood noted. He openly invited parties to challenge at the Commission the limits of FR service. He noted that FR customers "seem to have an unbounded upper-end, which I would love the opportunity to [address] if we ever get a contested pleading to define exactly just how full full-requirements can be." The "interplay" of frozen rates and unlimited access to pipeline capacity in a "growth part of the country that needs to have generation [makes for] a very complicated pipeline scenario," Wood said. In the June order, FERC gave the go-ahead for El Paso to construct and operate two delivery points and about six miles of lateral pipeline to provide service to the proposed gas-fired electric generation facilities of Pinnacle West and Duke Energy Maricopa LLC in Maricopa County, AZ. Pinnacle's 2,120 MW Redhawk power plant will require about 410 MMcf/d of gas, while Duke's 1,000 MW Arlington Valley plant will burn 210 MMcf/d. Both plants have scheduled in-service dates of June 1, 2002. Major producers and other El Paso shippers attacked El Paso's plan to provide FR service of 410 MMcf/d to the Redhawk plant, arguing that the service would further constrain an already capacity-tight El Paso system. Specifically, they objected to El Paso's plan to assign the FR contract (66,042 MMBtu/d) of Arizona Public Service to affiliate Pinnacle West Energy, as well as give a "huge increase" in the contract amount in order to serve the Redhawk plant. The protestors further argued that the plan would give Pinnacle West Energy a competitive rate advantage over existing contract-demand customers on the pipeline. Williston Basin Interstate Pipeline Company Building New Pipeline 09/27/2001 Business Wire (Copyright © 2001, Business Wire) BISMARCK, N.D.--(BUSINESS WIRE)--Sept. 27, 2001--Calling it the "largest pipeline construction project in company history," executives from Williston Basin Interstate Pipeline Company announced today their intent to file for federal regulatory approval to construct 245 miles of 16-inch natural gas pipeline spanning sections of Wyoming, Montana and North Dakota. The pipeline, expected to begin approximately 14 miles north of Gillette, Wyoming, and end south of Killdeer, North Dakota, initially would be capable of transporting from 80 to 120 million cubic feet of gas per day. "Additional pipeline transportation capacity could be added incrementally as natural gas production grows in the coalbed and other conventional fields in Wyoming and Montana, ultimately increasing the pipeline transportation volumes on this pipeline to as much as 200 million cubic feet per day," said Tony Finneman, executive vice president and general manager of Williston Basin. "In essence, we're looking to construct a `just-in-time' pipeline for the amount of natural gas being produced in the Powder River Basin, and we'll add capacity in step with increases in production," said Finneman, who announced the project today during the Fifth Annual Wyoming Natural Gas Fair in Jackson Hole, Wyoming. Initially, the pipeline is expected to feature three large compressor stations - one on the south end of the route in Wyoming, another in eastern Montana and the third in North Dakota. Additional transportation capacity through the pipeline can be made available by adding more compression facilities. The pipeline would transport natural gas from developing coalbed and conventional natural gas production in central Wyoming and south central Montana to interconnecting pipelines that will transport it to large midwestern markets. "The pipeline would also enhance access to our large natural gas storage facilities in eastern Montana," Finneman said. Availability of storage should be an advantage to large-volume consumers, such as utility companies and large industrial facilities, because they can buy natural gas when prices are low and store it for future use. Finneman said Williston Basin will be filing the project with the Federal Energy Regulatory Commission (FERC) in October. The selection of the pipeline's route is nearly complete and initial surveying work has begun. With FERC approval, construction could begin as early as the third quarter of 2002, with transportation service slated to begin in late 2002. Williston Basin Interstate Pipeline Company provides natural gas transportation and underground storage through a pipeline system in Montana, North Dakota, South Dakota and Wyoming. Williston Basin is an indirect subsidiary of MDU Resources Group, Inc., a multidimensional natural resource enterprise traded on the New York Stock Exchange as "MDU." For more information about Williston Basin, visit the company's Web site at www.wbip.com.
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