April 16, 2008

Natural Resources

Competing natural gas pipelines get support from Alaskan government

RICHARD GILBERT

staff writer

The race is on to build one of the largest private-sector projects ever in North America.

TransCanada Corp. was the front-runner to build a multi-billion dollar natural gas pipeline from Alaska to Alberta, but it is facing competition now that two major energy companies are planning to build their own pipeline.

BP and ConocoPhillips announced on April 8 that they are combining resources to start construction on the Alaska Gas Pipeline.

The two companies established a joint venture called Denali to build the pipeline between North Slope, Alaska and Alberta.

Denali will spend $600 million to begin the process of finding owners and wholesalers of natural gas to make long-term transportation commitments to the project. This process is necessary to raise financing for the project and should be completed by the end of 2010.

“This is the largest private-sector project ever performed in North America,” said president of BP Alaska Doug Suttles during a press conference in Anchorage.

“The project will consist of a gas treatment plant on Alaska’s North Slope and a large-diameter pipeline that travels some 700 miles (1,120 km) across Alaska, initially following the trans-Alaska pipeline corridor, and eventually joining the Alaska highway and going into Canada across the Yukon Territory and British Columbia to Alberta.”

The companies have already assigned staff to the joint project team and a project headquarters in Anchorage will be identified.

“We will begin staffing the new company immediately. Critical engineering and cost estimates will start immediately as well,” Suttles said.

“Denali will employ 150 employees by the end of 2008. Within the next three years, it will employ 500 people and several thousand contractors.”

The construction of the 3,200 kilometre natural gas pipeline will cost more than $30 billion to complete by 2018. The pipeline will move about four billion cubic feet of natural gas per day from Alaska to the rest of the U.S.

The Alaskan Government responded positively to the announcement by BP and ConocoPhillips.

“We look forward to any progress they will be able to show us on this project. Their decision to proceed is further proof that competition does work,” said Governor Sarah Palin.

“How ever we are able to access our vast natural gas resources, the outcome can’t help but serve the interests of Alaska and Alaskans.”

The position of the governor, in relation to competition in the development of the Alaska pipeline, has changed significantly from earlier this year.

The government of Alaska received proposals for the Alaska natural gas pipeline on November 30 and reviewed them to determine whether they met the conditions required under the Alaska Gas Inducement Act (AGIA).

The governor announced on Jan. 4 that an application from TransCanada was the only proposal that met all the mandatory requirements set out in AGIA.

This allowed TransCanada’s application to move to the evaluation phase of the AGIA process.

Six companies met the November deadline, including Conoco Phillips, one of the three largest owners of North Slope gas reserves alongside Exxon Mobil Corp. and BP PLC.

Conoco’s submission proposal included an option to move the gas to Alberta and then on to Chicago through a bullet line, which would bypass the Alberta grid. The Alberta system is largely owned by TransCanada.

Palin announced on March 28 that AGIA findings will be presented to the legislature during the week of May 19. She also called the legislature into a 30-day special session on June 3.

The legislature would then have 60 days to approve issuance of the license.

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