BP, ConocoPhillips join to build $20 billion Denali gas line

By OGJ editors
HOUSTON, Apr. 9 -- BP PLC and ConocoPhillips announced Apr. 8 they will join resources to build a 4 bcfd natural gas pipeline extending from Alaska's North Slope to markets in Canada and the US. Dubbed Denali, the proposed $20 billion Alaskan gas line would be the "largest private-sector construction project ever built in North America," the partners said.

In a press conference held Apr. 8, BP and ConocoPhillips revealed plans to spend $600 million over the next 36 months on the first of many phases of the Denali line, namely an open season, which is slated to begin before yearend 2010. After the open season, the companies will file to obtain certification from the US Federal Energy Regulatory Commission and Canada's National Energy Board and will move forward with construction of the project.

The partners also will have to convince Alaskan authorities that their plan is the best one for developing the state's gas resources and that it's in line with the state's Alaska Gasline Inducement Act, adopted in February. AGIA, which was designed to advance construction of a gas pipeline from ANS, requires a pipeline project builder to meet certain requirements that will advance the project, in exchange for a license that provides up to $500 million in matching funds. These funds would help reduce the financial risks that such a huge project faces in its early stages.

Alaska received five applications coming from AEnergia LLC, the Alaska Gasline Port Authority, the Alaska Natural Gas Development Authority, Little Susitna Construction Co., and a joint application from TransCanada Alaska Co. LLC and Foothills Pipe Lines Ltd. TransCanada's proposal was the only one to be accepted as completed. A proposal submitted by ConocoPhillips did not meet the state's application criteria, the state said. BP and ExxonMobil Corp. did not submit an application.

Alaska Gov. Sarah Palin said of BP and ConocoPhillips's effort: "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."

At this writing, TransCanada had not released any comment regarding BP and ConocoPhillips's announcement.

Project details
BP and ConocoPhillips said they will form a new company, to be headquartered in Anchorage, to manage the project. During the press conference, the companies said that a joint project team has been mobilized and that field work will begin this summer on the line.

The project will comprise about 2,000 miles of large-diameter, buried pipeline that will transverse Alaska, the Yukon Territory and British Columbia to Alberta. The line will operate at about 2,500 psi and will have 40,000-hp compressor stations every 100-200 miles. A gas treatment plant will be built near existing Prudhoe Bay facilities. The line will require 5-6 million tons of steel, the partners said.

The companies said should it later be required to transport gas on from Alberta, the project will also include about 1,500 miles of large-diameter line from Alberta on to the Lower 48 states. The companies said they would seek "other equity partners, including pipeline companies," that would "add value to the project and help manage the risks involved." Press reports have indicated that ExxonMobil Corp., the third-largest ANS producer, has been asked to join.

The partners said the Denali line will support in-state gas distribution efforts including gas to south-central Alaska. The line will provide at least five Alaskan offtake points, including Fairbanks.

A new web site outlining the project has been launched at denali-thealaskagaspipeline.com.

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