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Petroleum News: Shell will offer to market State of Alaska’s natural gas

Shell will offer to market State of Alaska’s natural gas

Kristen Nelson

Petroleum News

Alaska Gov. Frank Murkowski met in The Hague April 11 with Malcolm Brinded, Royal Dutch Shell executive director, exploration and production.

The governor’s office said Shell expressed interest in marketing Alaska’s share of natural gas from the proposed Alaska natural gas pipeline and indicated it would soon submit an independent proposal to the state to market its gas. Shell is one of the largest transporters and marketers of natural gas in the world, the governor’s office said.

“One of the key features of the gas pipeline contract is that the state will take its gas in kind,” Murkowski said in an April 12 statement. “While this provides significant financial benefits to the state, some have expressed concern about the state’s capacity to market that gas.

“It is of tremendous value to have a worldwide industry leader and expert in gas marketing and transportation such as Shell express interest in marketing the state’s gas.”

Cam Toohey, Alaska government and external affairs manager, Shell Exploration & Production, told Petroleum News that Shell and the governor had a good meeting in The Hague. He said Shell considers the discussion preliminary and has nothing further to disclose at this time.

Coral Energy Shell’s North American gas affiliate

Shell Trading affiliate Coral Energy, headquartered in Houston, is, according to the company’s Web site, the exclusive marketer of Shell Oil’s North America natural gas production, some 2 billion cubic feet of production per day, and has overall sales volumes of more than 9 bcf per day.

Shell Trading promotes its services as including “experts in energy marketing and trading, risk management, energy utilization, asset and supply portfolio management, financial services, power generation, and natural gas transportation and storage.”

The company said its natural gas capabilities include a “broad geographic presence” allowing it “to take supply just about anywhere” and expertise in risk management which means it can help its customers “manage price volatility.”

Shell Trading said it can “originate deals ranging from basic commodity supply contracts to complex structured transactions.” The company said it participates “in all North American gas markets, with trading operations in Houston, Syracuse, San Diego and Calgary.”

The complexities of the gas trading business was one of the issues raised by former Department of Natural Resources employees who resigned last year over differences with the administration on the gas pipeline fiscal contract negotiations.

Marty Rutherford, former DNR deputy commissioner, told a Pac Com audience in February that “gas trades very differently and many more times than oil, creating transportation, marketing and valuation challenges,” and allowing “participants to continually try to ‘game’ the system and create extra profit opportunities” within transactions “at the expense of less sophisticated players.”

Syngas assistance requested

Murkowski also requested that Shell appoint a team of experts to evaluate a syngas project for Beluga coal. The governor’s office said syngas could provide feedstock for Agrium’s Kenai nitrogen facility and could also be used to provide gas to the Marathon and ConocoPhillips liquefied natural gas plant, which faces export authorization renewal in 2009.

The project could also develop a coal co-generation plant for power or for reinjection of carbon dioxide from the coal syngas back into Cook Inlet wells to maintain production, the governor’s office said. Syngas can also be used to create synthetic petroleum, which could be exported or used in Alaska.

The governor’s office said the state will create a team to begin detailed examination of a syngas project with Shell and other interested parties.

“Every effort must be made to ensure the continued operation of the two Kenai area plants, which are major employers,” Murkowski said. “We have the resource — coal — and the promise of technology to fully unlock the potential of that resource to benefit Alaskans.”

The governor’s office said there was a detailed discussion on development of hydrogen as a clean, sustainable source for power generation in rural areas. Iceland is using hydrogen on some buses and cars and will be supplying it to fishing vessels and a prototype is currently operational in a village in Norway. A wind turbine provides the power to produce the hydrogen which is then stored and powers two 600 kilowatt fuel cell generators.

“This technology has the potential to be of tremendous benefit to our rural regions,” Murkowski said. “With the high cost of energy in rural Alaska, it is critical that we fully explore alternative sources of energy.”

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