Oil and gas prices will rebound eventually

Talking people - or large companies, or even governments for that matter - into spending money in the face of a worldwide recession is an uphill battle.

There is always a silver lining somewhere. But in these uncertain economic times, not many have the foresight to spend money now for a profit down the road.

If you have the cash, and a reliable job, this is a great time to go bargain hunting for a house or to pick up some Microsoft stock while it is affordable.

And if you are an energy company or are sitting on sizable gas or oil deposits, now is a good time to invest in new projects and badly needed infrastructure. Even if an economic recovery doesn't surface until 2010, no one doubts the price of oil and gas will rise again.

Common sense dictates that having the supply and delivery capacity to meet that future demand is a smart business decision.

Sadly, it is looking like all the parties involved in the potential $30 million (Dh110.21 million) Alaska gas pipeline project are getting cold feet as a chill settles over the price of natural gas.

Already there are two competing pipeline projects.

On one side is TransCanada Corp and the budget-strapped state of Alaska. Proposing an alternate pipeline called Denali, is British Petroleum and ConocoPhilips, which just laid off 1,300 US workers last month.

Both pipelines would run 2,735 kilometres from northern Alaska to a current network in Alberta, Canada.

But because Alaska pulled the same dumb budgeting stunt as Venezuela and Iran and balanced its budget based on unrealistically high oil prices, the northernmost US state suddenly has a lot less money to spend than expected.

Already the Alaska legislature appears to be taking a dim view of money spent on a pipeline project that won't actually transport natural gas for more than a decade.

That viewpoint, however, is short in the extreme.

Construction of the state's original oil pipeline, the Alyeska or Trans-Alaska Pipeline, brought thousands of jobs into the state. Those types of jobs are going to be sorely needed in a state which is feeling the economic pinch.

In addition to the potential for serious job growth, any delivery from either proposed gas line isn't until 2021, by which time demand for gas should have reheated. After all, there are roughly 35 trillion cubic feet of natural gas under Alaska's north slope. Sooner or later, demand will be there for that gas and the state wants to be in a position to sell when the time is right. Both BP and ConocoPhilips have been making noise about pulling back on all kinds of development projects, including their pipeline.

This doesn't mean, however, that there aren't reasons to examine Alaska's gas pipeline projects.

But a more valid concern than the current price downturn is future competition from alternative energy sources like solar, hydroelectric and wind.

There is also a host of new technology that is allowing drillers to access previously unavailable gas is also entering the market.

Brian Frank, president of BP Energy's North American trading group, told an Alaska-based publication that they are pumping gas today that couldn't be reached 10 years ago.

The United States has also ended up with a surplus of liquid natural gas regasification capacity, which could mean imported LNG could compete with Alaska gas down the road.

But if new technologies like Qatar's gas to liquid airline fuel take off a whole new market could open up as well.

- The writer is a freelance journalist based in Alaska, USA.