On January 22, 2004, MidAmerican Energy Holdings Co., a wholly owned subsidiary of Berkshire Hathaway Inc., along with a consortium of Alaska Native corporations, filed applications to build a pipeline with the Alaska Department of Revenue. The CEO of Berkshire Hathaway Inc. is Mr. Warren Buffett. This plan calls for construction of a 745-mile pipeline at a projected cost of $6.3 billion to connect from near Prudhoe Bay to the Alaska-Yukon border. The pipeline would have a capacity of 4.5 billion cubic feet of gas per day and could be in operation by 2010.
On January 23, 2004, ConocoPhillips, British Petroleum and ExxonMobil won approval from the state of Alaska to begin negotiating on state royalty arrangements for a natural gas pipeline. This plan calls for construction of a 3,500 mile pipeline with capacity to ship 5 billion cubic feet of gas per day taking approximately 10 years to build. Apex owns 3.475% of the ItiyokI-27 well in the Beaufort Sea. Review of the geological data indicates proven recoverable gas reserves of over 100 BSCF and proven recoverable oil reserves of over 8,950 MSTB worth an estimated $28,321,250. If efforts to build a pipeline continue, Apex could eventually bring these reserves to market.
Assuming $5/1000FT(3) of gas and $35/STB of oil, here are approximate calculations of the value of Apex's share of this well:
There are now two applications underway for a natural gas pipeline to deliver reserves to market. The next step is for the Alaska State Legislature to approve a pipeline construction contract. Lawmakers say they hope to approve a contract this session, even if it means holding a special session to get all the work done.
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