Transcript Final Summary - Informetrica

Informetrica
Limited
Alaska Highway Pipeline Project
(AHPP)
Summary of Findings
Informetrica Limited
7 May 2002
April 2002
AHPP Summary
1
Informetrica
Limited
The Future Demand for
Natural Gas
• Gas demand in the North American economy is
rising, with projections of 38.5 tcf per year by
2020
• The real price of NG is expected to rise
• Alaska supplies are competitive, if delivered
through an efficient transportation system
• Incremental supplies of 1.4 tcf per year available
from North Slope
April 2002
AHPP Summary
2
Informetrica
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North Slope Contribution to
US Gas Supplies
35
30
Trillion cubic feet
25
20
15
10
5
0
1980
1985
1990
Domestic Production
April 2002
1995
2000
North Slope Production
AHPP Summary
2005
2010
2015
2020
Imports and Inventory Changes
3
Informetrica
Limited
April 2002
AHPP Summary
4
Informetrica
Limited
Figure 3 – Proposed Pipeline Routes
Prudhoe
Bay
Northern Route
Alaska
Alaska
Highway
Route
Inuvik
Yukon
N.W.T.
Fort Good
Hope
Whitehorse
Fort
Simpson
Mackenzie
Delta
Stand
Alone
Fort
Nelson
B.C.
Fort
St.John
April 2002
AHPP Summary
Boundary
Lake
Alberta
5
Informetrica
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Project Characteristics
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Length – 2, 810 km (1,746 miles)
Pipe – 42”, 0.75” wall, X80
Tons of steel pipe – 1,381,000
Construction Costs – $13.6 B (US$9.1 B)
Real Tariff – $1.57 /mcf (US$1.05)
Volume – 2.5 bcfd rising to 4 bcfd
Compressors - 40
April 2002
AHPP Summary
6
Informetrica
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Alaska
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Length – 1,193 km (741 miles)
Pipe – 42”, 0.75” wall, X80
Tons of steel pipe – 586,000
Construction Costs – $6.6 B (US$4.4 B) 49%
Real Tariff – $0.766 /mcf (US$0.51)
Volume – 2.5 bcfd to 4 bcfd
Compressors - 16
April 2002
AHPP Summary
7
Informetrica
Limited
Yukon
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Length – 832 km (517 miles)
Pipe – 42”, 0.75” wall, X80
Tons of steel pipe – 409,000
Construction Costs – $3.8 B (US$2.5 B) 54%
Real Tariff – $0.435 /mcf (US$0.29)
Volume – 2.5 bcfd to 4 bcfd
Compressors – 10
April 2002
AHPP Summary
8
Informetrica
Limited
British Columbia
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Length – 721 km (448 miles)
Pipe – 42”, 0.75” wall, X80
Tons of steel pipe – 355,000
Construction Costs – $3.0 B (US$2.0 B) 43%
Real Tariff – $0.348 /mcf (US$0.232)
Volume – 2.5 bcfd to 4 bcfd
Compressors - 14
April 2002
AHPP Summary
9
Informetrica
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Alberta
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Length – 64 km (40 miles)
Pipe – 42”, 0.75” wall, X80
Tons of steel pipe – 32,000
Construction Costs – $0.2 B (US$0.12 B) 3%
Real Tariff – $0.023 /mcf (US$0.015)
Volume – 2.5 bcfd to 4 bcfd
Compressors - 0
April 2002
AHPP Summary
10
Informetrica
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Comparison to TAPS
Cost (2000$)
Length
BTU Throughput
per day
Tons of pipe
Employment
April 2002
AHPP
• US$9.1 B
• 1750 miles
• 4.1 trillion
TAPS
• US$11.3 B
• 800 miles
• 8.4 trillion
• 1,381,000
• 59,000
• 450,000
• 70,000
AHPP Summary
11
Informetrica
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Volumes of Gas
4.5
billion cubic feet per day
4
3.5
3
2.5
2
1.5
1
0.5
0
2005
April 2002
2010
AHPP Summary
2015
12
Informetrica
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Tariff (Cdn$/mcf)
Tariffs
3.00
2.50
2.00
1.50
1.00
2001
2006
2011
Levelized Nominal
April 2002
2016
Year
2021
Escalated Nominal
AHPP Summary
2026
2031
Levelized Real
13
Informetrica
Limited
Tariff Analysis
• A nominal tariff of $2.05 per mcf (Canadian
$) , or
• A real tariff that starts at $1.57 per mcf in
2001, escalated by CPI will produce
equivalent incomes
• Alaska (C$0.766), Canada (C$0.805)
• Yukon (C$0.435), BC (C$0.348), Alberta
(C$0.023)
April 2002
AHPP Summary
14
Informetrica
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Types of analysis for this project
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Benefit-Cost Analysis
National Economic Impact
Provincial/Territorial Economic Impact
Regional-Urban Model
YTG Revenue and Expenditure Model
Local Area Model
Occupational Impact
April 2002
AHPP Summary
15
Informetrica
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Benefit-cost Analysis
• Positive Net Benefits
• Net gains mainly in Alaska and lower 48
• Regulation of pipeline rate of return
minimizes Canadian gains
• Increased government revenues in Canada
April 2002
AHPP Summary
16
Informetrica
NPV of Net Benefits
B$, Canadian
Limited
Production, US
0%
32.4
7%
8.0
10%
4.6
15%
1.9
Transmission, US
15.4
2.3
0.6
-0.8
Transmission, Cdn
13.8
1.6
0.1
-1.1
Government, US
50.0
13.6
8.5
4.2
Government, Cdn
12.5
3.7
2.4
1.3
Federal
6.2
1.8
1.2
0.6
Provincial
6.3
1.9
1.2
0.7
124.1
29.2
16.0
5.5
Total
April 2002
AHPP Summary
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Informetrica
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Implications of Benefit-cost
• Financing from US sources or normal
financial markets
• Canadian interest hinges on federal &
provincial revenue
• Yukon interest areas:
– Jobs
– Energy options
– Minimizing adverse effects
April 2002
AHPP Summary
18
Informetrica
Limited
Economic Impact Analysis
• Uses statistical/econometric methods to
develop a mathematical model of the
economy (the “Base Case”)
• Adds the project parameters (“Injection”) to
the “Base Case” model to estimate Direct,
Indirect and Induced Effects on a number of
economic variables (e.g., GDP, employment,
tax revenues)
April 2002
AHPP Summary
19
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Two Scenarios
• Scenario I – Governments retain all balance
improvements, choosing to reduce
outstanding debt
• Scenario 2 – Federal government recycles
improved balances through:
– Corporate tax reductions
– Personal income tax reductions
– Reduced EI contributions
April 2002
AHPP Summary
20
Informetrica
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Key Impacts
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Investment
GDP
Employment
Unemployment
Inflation
Fiscal Balances (Taxes, Govt. Spending, Debt)
Current Account Balances
April 2002
AHPP Summary
21
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Construction Period Impacts, 2002-12
GDP,Millions Employment
2000$)
(person-years)
Investment - Canada
6,990
30,440
Yukon
3,369
12,114
Scenario 1-Canada
9,762
72,799
Yukon
3,736
19,448
Scenario 2 - Canada
14,497
194,396
Yukon
5,082
28,585
April 2002
AHPP Summary
22
Informetrica
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Operations Period Impacts, 2013-25
GDP,Millions Employment
2000$) (person-years)
Revenue- Canada
15,288
4,253 (327)
Yukon
8,252
2,220 (171)
Scenario 1-Canada
16,678
34,921
Yukon
7,775
13,029
Scenario 2 - Canada
16,906
182,678
Yukon
8,911
21,998
April 2002
AHPP Summary
23
Informetrica
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Investment
millions of constant 2000$
$2,000
$1,500
$1,000
$500
$0
-$500
2002
April 2002
2005
2008
2011
2014
2017
2020
Structures (direct)
Machinery & Equipment (direct)
Total Induced (Scenario 1)
Total Induced Scenario 2)
AHPP Summary
2023
24
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GDP
0.3
0.25
% Impact
0.2
0.15
0.1
0.05
0
2002
2007
2012
Scenario 1
April 2002
AHPP Summary
2017
2022
Scenario 2
25
Informetrica
Limited
Employment
50
Employment (000s)
40
30
20
10
0
-10
2002
2007
2012
Scenario 1
April 2002
2017
2022
Scenario 2
AHPP Summary
26
Informetrica
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Fiscal Balances – Scenario 1
(millions of dollars)
$2,500
Im pact (Nom inal $)
$2,000
$1,500
$1,000
$500
$0
2002
Federal
April 2002
2007
2012
Provincial-Local-Hospital
AHPP Summary
2017
2022
CPP & QPP
27
Informetrica
Limited
Fiscal Balances – Scenario 2
(millions of dollars)
Im pact (Nom inal $)
$1,500
$1,000
$500
$0
-$500
2002
Federal
April 2002
2007
2012
Provincial-Local-Hospital
AHPP Summary
2017
2022
CPP & QPP
28
Informetrica
Limited
National Findings
• No stresses on macro economy
• Procurement effects important to steel and
turbines
• Additional investment may be needed in
Alberta
• Larger impacts if governments recycle their
“fiscal dividend”
April 2002
AHPP Summary
29
Informetrica
Limited
Regional Impacts
• Direct spending on construction & operations
determined by location of pipeline
• Indirect spending (commodity content of direct
spending) determined by the location of suppliers
and their suppliers
• Induced spending depends on distribution of
wage income and sources of supply of consumer
goods and services
April 2002
AHPP Summary
30
Informetrica
Limited
Territories
(effects concentrated in Yukon)
% Impact GDP
12
10
8
6
4
2
Employment (000s)
0
2002
2005
2008
2011
2014
2017
2020
2023
2002
2005
2008
2011
2014
2017
2020
2023
10
8
6
4
2
0
Scenario I
April 2002
AHPP Summary
Scenario II
31
Informetrica
Limited
British Columbia
% Impact GDP
0.5
0.4
0.3
0.2
0.1
Employment (000s)
0
2002
2005
2008
2011
2014
2017
2020
2023
2002
2005
2008
2011
2014
2017
2020
2023
12
10
8
6
4
2
0
-2
Scenario I
Scenario II
1.2
1
2000
0.8
1500
0.6
1000
0.4
500
0.2
April 2002
AHPP Summary
32
Informetrica
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Alberta
% Impact GDP
0.2
0.15
0.1
0.05
Employment (000s)
0
2002
2005
2008
2011
2014
2017
2020
2023
2002
2005
2008
2011
2014
2017
2020
2023
5
4
3
2
1
0
-1
Scenario I
April 2002
Scenario II
AHPP Summary
33
Informetrica
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Rest-of-Canada
% Impact GDP
0.2
0.15
0.1
0.05
0
2002
2005
2008
2011
2014
2017
2020
2023
2002
2005
2008
2011
2014
2017
2020
2023
Employment (000s)
-0.05
25
20
15
10
5
0
-5
-10
Scenario I
April 2002
Scenario II
AHPP Summary
34
Informetrica
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Regional Findings
• The impacts on the provinces are modest
• Impacts on Yukon are large
• Procurement has been directed to increase
impact and test industrial capacities
• Distinction between residence of workers
and place of work important
• Assumption that 80% of construction
workers come from outside Yukon
April 2002
AHPP Summary
35
Informetrica
Limited
Yukon Impacts
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Yukon economy identified separately
Base Case View
Impacts from RIM on Yukon Base
Focus on:
– Employment
– Wage Bill
– Disposable Income
• Direct and Indirect +Induced
April 2002
AHPP Summary
36
Informetrica
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Yukon GDP Impact
% Impact
40
30
20
10
0
2002
2004 2006 2008
2010 2012 2014
Scenario 1
April 2002
AHPP Summary
2016 2018 2020
2022 2024
Scenario 2
37
Informetrica
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Yukon Employment
10
Levels
8
6
4
2
0
2002
2004
2006
2008
2010
2012
2014
Scenario 1
April 2002
AHPP Summary
2016
2018
2020
2022
2024
Scenario 2
38
Informetrica
Limited
Yukon Wage Bill
35
% Impact
30
25
20
15
10
5
0
2002
2004
2006
2008
2010
2012
2014
Scenario I
April 2002
AHPP Summary
2016
2018
2020
2022
2024
Scenario II
39
Informetrica
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Yukon Real Disposable Income
30
25
20
15
10
5
0
2002
2004
2006
2008 2010
2012
2014
Scenario 1
April 2002
AHPP Summary
2016 2018
2020
2022
2024
Scenario 2
40
Informetrica
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Key Industry Impacts - Yukon
Top 10 industry impacts during construction period
1. Construction
2. Professional Services to Business
3. Accommodation and Food
4. Personal Finance
5. Motor Transportation
6. Telecommunications
7. Other Personal Services
8. Retail Trade
9. Air Transportation
10. Printing and Publishing
Employment Impacts
Scenario 1
Scenario 2
Peak Employment
6930
8250
Average Employment 2005-07
4723
5900
April 2002
AHPP Summary
41
Informetrica
Limited
Yukon Fiscal Impacts
Scenario I
Impact less Base ($ mil)
30
25
20
15
10
5
0
-5
-10
-15
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10
Own-Source Revenue
April 2002
AHPP Summary
Fiscal Grant
42
Informetrica
Limited
Yukon Fiscal Impacts
Impact less Base ($ mil)
Scenario II
35
30
25
20
15
10
5
0
-5
-10
-15
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10
Own-Source Revenue
April 2002
AHPP Summary
Fiscal Grant
43
Informetrica
Limited
Findings from Fiscal Model
• Own revenue increases from activity are offset by
federal transfer reductions
• Expenditure increases will worsen Territorial
Balance, unless financing arrangement made or
territorial tax rates increased
• Revenue consequences of pipeline construction
are modest at Territorial level
• Federal government is major beneficiary
April 2002
AHPP Summary
44
Informetrica
Limited
Local Impacts
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Employment Effects
Local supply
Spending by non-residents
Bidding up Local Wages
April 2002
AHPP Summary
45
Informetrica
Limited
Occupational Impacts, Yukon
1.
2.
3.
4.
Construction (1128)
Clerical (432)
Services (370)
Managerial &
Administration (366)
5. Sales (199)
April 2002
6. Fabricating,
Assembly (157)
7. Natural Sciences
(132)
8. Transportation &
Eqpt. Ops (104)
9. Farming (70)
10. Machining (55)
AHPP Summary
46
Informetrica
Limited
Tough Questions
• Construction costs determine tariff and wellhead
prices: can costs be controlled?
• Problems on any segment can hurt project
economics. How to coordinate and avoid
difficulties?
• Will escalating tariff be acceptable?
• Need commitments to use the pipeline for some
defined amount for twenty-five years in order to
finance it. Who guarantees performance?
April 2002
AHPP Summary
47
Informetrica
Limited
Yukon Development
• Expansion Opportunities – see industry
forecasts
• New areas – not supplied by Yukon now
What can be done here?
• Ancillary and Post-pipeline Opportunities
• When to start?
April 2002
AHPP Summary
48
Informetrica
Limited
Comparison to Other Studies
• 2000 Federal Study
–
–
–
–
–
–
April 2002
Longer Pipeline, including Alberta and Sask.
Pipe imported
Fiscal policy like Scenario 1
Construction costs per mile lower
Less Throughput
Total tariff larger (US$2.83 vs US$2.63 from
Prudhoe Bay to Chicago)
AHPP Summary
49
Informetrica
Limited
Next Steps
• Final Route Definition
• Define total direct HR requirements
• Review occupational requirements against
supplies
• Contingency for low NG prices
– Indexed bonds?
– Long-term contracts?
April 2002
AHPP Summary
50
Informetrica
Limited
Steps after “Go”
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Procurement Plans
ROW use
Training of Yukoners
Yukon business mobilization
Federal-territorial agreements
Agreements with Alaska and BC about
people, goods and services, supply,
regulatory, and information
April 2002
AHPP Summary
51
Informetrica
Limited
AHPP – Will it Go?
• Cost effective – Alaska field costs are sunk
and Alberta south has been pre-built
• Least-cost option for delivering Prudhoe
Bay gas
• Most regulatory hurdles already jumped
• No insurmountable bottlenecks identified
• Do US consumers want the gas? Are
producers ready to sell?
April 2002
AHPP Summary
52
Informetrica
Limited
Outputs of Research
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Final Report (On web)
19 Working Papers
Benefit-cost model
IPIO calculator
Local Area Model
Yukon Fiscal Model
Occupational Detail – Yukon
April 2002
AHPP Summary
53
Informetrica
Limited
Working Paper Topics
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Base Case
Key Assumptions
Ancillary Spending
Yukon Gas Fields
Post-Pipeline
Developments
• US Energy Demand
• Direct Effects of Pipeline
• Cost-Benefit Analysis
April 2002
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National Impacts
Provincial Impacts
Yukon Impacts
IPIO
Local Area Impacts
Govt. Revenue
Unions, Environment,
First Nations, Human
Resources
• Comparison to other
studies
AHPP Summary
54