BP PLC and ConocoPhillips announced 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 for authorization to 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 (AGIA), passed midyear 2007 and 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 for gas pipeline proposals. These came 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. Trans- Canada’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 latest 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.”
As OGJ went to press last week, TransCanada had not released any comment regarding BP and ConocoPhillips’s announcement. The Calgary-based firm however already is working with ConocoPhillips to construct the 2,148-mile Keystone oil pipeline from Alberta to the US Midwest and Cushing, Okla.
Project details
BP and ConocoPhillips said they will form a new company, to be headquartered in Anchorage, to manage the Denali project. During the Apr. 8 press conference, the companies reported 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.
‘Great news’ for Alaska
Sen. Lisa Murkowski (R-Alas.) welcomed the announcement. “It is great news for Alaska that companies that control well more than 60% of the North Slope’s natural gas are now committing themselves to move ahead to build a gas pipeline. This should give utilities in the Lower 48 states and suppliers worldwide some confidence in planning on Alaska’s gas getting into America’s market by about 2019, which is probably the most important ingredient in making sure that Alaska’s gas is not replaced by an imported liquid natural gas,” she said.
Murkowski also congratulated Gov. Palin for helping to bring about the ConocoPhillips-BP announcement. “By her tough stance over the past 2 years, she has brought the companies around to building a gas line now. It is unlikely this announcement would have come today, if not for a process like AGIA that has crystallized the outlook for development of Alaska’s North Slope gas reserves,” Murkowski said. “Hopefully, before too long, TransCanada will be brought into this marriage, as I hope ExxonMobil also will decide to join in the not too distant future,” she added.
‘Positive and important’
The Senate Energy and Natural Resources Committee’s leadership applauded the news. Chairman Jeff Bingaman (D-NM) called it “a positive and important” development which would do more than bring vast reserves of previously stranded North Slope gas to markets. “In addition, as the largest private construction project ever in North America, the pipeline will provide great economic stimulus by creating thousands of jobs and business opportunities in the US and Canada,” he said.
Pete V. Domenici (R-NM), the committee’s ranking minority member, said, “Ultimately, when constructed, the new Alaska gas pipeline will bring natural gas in Alaska’s North Slope to Alberta, where it can eventually connect with existing lines and be brought to the Lower 48 states. With uncertainty surrounding our ability to meet future natural gas demand, and the potential for more exploration in Alaska as a result of constructing the pipeline, this project is vital.”
Rep. Joe Barton (R-Tex.), ranking minority member of the House Energy and Commerce Committee, said that the project will bring “vast amounts of both natural gas and economic opportunity to the Lower 48, and that’s why I wish we could open it today instead of having to wait 9 years for the construction.
“The United States has subsisted on the same gas supply levels for the last decade, and you can see it in the steadily rising cost of heating our homes. That might be even more expensive without the unfortunate 19% reduction by industrial gas users, reflected in closed plants and lost jobs. This new pipeline will counter both those unhappy trends by adding 4 bcfd to our supply, which is enough to fill 6-8% of America’s daily requirement,” he continued.
“Life in America requires energy, and we’ve got enormous reserves of it right here in the neighborhood. Maybe that’s the most important aspect of today’s agreement: It’s a move to be self-reliant instead of betting more of our future on energy from across the oceans,” Barton said.
A new web site outlining the pipeline project has been launched at denali-thealaskagaspipeline.com.