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Companies plan pipeline to carry North Slope gas

Wed., April 9, 2008

JUNEAU, Alaska – Two of the world’s largest oil companies announced plans Tuesday to jointly develop a multibillion-dollar pipeline to move North Slope natural gas to U.S. markets.

Britain’s BP PLC and ConocoPhillips, based in Houston, said they plan to spend $600 million in the first phase of the project over the next three years.

The plan, dubbed “Denali – the Alaska Gas Pipeline,” is to deliver natural gas via a 2,000-mile pipeline from the energy-rich North Slope in Alaska to a pipeline hub in Alberta, Canada, which has links to numerous other markets.

If necessary, the project would also involve building an additional 1,500-mile pipeline to U.S. markets.

The pipeline would eventually move about 4 billion cubic feet of natural gas a day to markets, about 6 percent to 8 percent of daily U.S. consumption, the companies said.

No timeline was announced for construction, but the first phase involves project field work this summer and securing long-term commitments from gas companies to send gas down the pipeline.

Much of that commitment is likely to come from BP, ConocoPhillips and Exxon Mobil Corp. The three companies hold leases to nearly 35 trillion cubic feet of North Slope gas.

While energy analysts have estimated there to be about 35 trillion cubic feet of proved natural gas reserves in the North Slope, they believe that figure will rise.

Earlier this year, Gov. Sarah Palin rejected a pipeline proposal by ConocoPhillips alone, opting to stick with a plan by TransCanada Alaska Co. LLC/Foothills Pipelines. That company’s plan for a pipeline remains under review by state regulators.

ConocoPhillips submitted the plan to Palin’s gas line team in November, but it was outside the bid requirements of the state’s Alaska Gasline Inducement Act, or AGIA.

The plan was billed as an alternative to AGIA, a law that called for bidders to guarantee progress toward construction of a pipeline. TransCanada’s plan complies with the law’s guidelines.

ConocoPhillips, the North Slope’s largest oil producer, wanted to negotiate a long-term fiscal package covering taxes and royalties on natural gas production; this approach failed under the previous state administration and prompted Palin to chart a new course under AGIA.

In January, she turned down the ConocoPhillips proposal, saying such a deal could deprive the state of its regulatory powers.

The company decided to move forward on its own, saying it did not want lose a potential summer season of field work.


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