September 23, 2006
Anchorage, Alaska - Pace Energy Services President & CEO Timothy Sutherland, in a keynote address to the Alaska Permanent Fund Corporation annual dinner last Wednesday night, outlined the state's position and opportunities in the world energy picture.
Governor Frank H. Murkowski announced at the dinner the amount of this year's permanent fund dividend of $1,106.96. He said it is instructive that Sutherland holds the same view on building the gas pipeline as the administration, the producers, and numerous federal officials who have advocated in recent months that Alaska needs to move forward on the project now, or risk never getting it.
One of the world's recognized energy and funds leaders, Sutherland warned there is a real danger of Alaska losing the gas pipeline.
"My advice to you tonight, ladies and gentlemen, is: please, don't blow it," Sutherland told the approximately 200 attendees. "There is indeed much to celebrate this evening. But let's not forget that the prospects for success looked rather bleak many years before the construction of TAPS."
Sutherland, who worked as an oil industry analyst in 1973, noted the difficulties Alaska faced at that time in convincing the nation that the oil pipeline should be built. Since 1977, the Trans Alaska Pipeline has carried billions of barrels of North Slope oil to Valdez, where it is shipped out on tankers. Without it, oil production would not be possible on the North Slope, and, as a consequence, there would be no Permanent Fund or dividend.
"That's one example, and the second is Shtokman," Sutherland said. "It is about the same size, in many respects, as the Alaska gas project. The politics are different; the country is different; the language is different; but the obstacles are very much the same."
Shtokman is a Russian-based gas pipeline hoping to expand into Norway's market and network and is a major project listed in the US Department of Energy database.
"The common message of 1973 TAPS and Shtokman are the same," Sutherland said. "Both of these require something that we don't have enough of: a little bit of prudence. But they also require authentic, adult dialogue amongst interested parties if we hope to have them proceed.
"In the Shtokman project I can tell you we've worked tirelessly to accomplish this. In all large projects at times there's one party or another who've taken the sights off the common good, to preserve a slight marginal benefit for himself even at the risk of the entire project. Let's not allow that to happen.
"Let's look at what the future could hold: oil is forecasted to decline 41%, revenue down 61% by 2020. This profile is not an appealing prospect for either the citizens or Alaska elected leaders. The solution is the monetization of the stranded gas assets of the North Slope and needed oil and gas reforms. The natural gas royalties and tax alone could add about $2 billion to revenues by 2020, keeping things level to about where they are today.
Sutherland noted that unfortunately it appears that the Alaska gas pipeline project is "dead in the water. Meanwhile, other states, other nations and commercial enterprises are developing new means to satisfy America's appetite. Ladies and gentlemen, the rest of the world is not waiting for Alaska.
"The longer the fate of the Alaska gas pipeline system remains uncertain, the more domestic and import capacity will be planned, built and operating. At some point, it is possible, that Alaska gas will not seem so important to Chicago and New York. If that point comes, the Alaska pipeline plans will have to be shelved again. If this does happen, you will be living with a declining revenue profile and lost job opportunities. And the U.S. will become more dependent upon foreign oil.
"We're spending more than $350 billion on imported energy in the U.S., a tremendous drain on job opportunities."
"Let's celebrate this evening, really a model for many to copy, let's also remember that time is not on our side Our hay is not yet in our barn. As we sit here tonight, the engines of finance and technology are creating resources and infrastructure to feed the appetite for gas and energy in the U.S. But this evening as well, those engines appears to be idle in Alaska. The longer they remain idle the more likely they'll become very, very marginal."
"In recognition that the world will not wait on Alaska, let's remember: you folks have done this before, it's time for you to do it again. Let prudence propel progress, not prevent it. And ladies and gentlemen, let's restart the engines in Alaska."
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