TransCanada, ExxonMobil join forces on Alaska gas pipeline
TransCanada Corp. and ExxonMobil Corp. reached agreement June 11 to work together on TransCanada’s Alaska Pipeline Project natural gas pipeline.
Christopher E. Smith
OGJ Pipeline Editor
HOUSTON, June 12 -- TransCanada Corp. and ExxonMobil Corp. reached agreement June 11 to work together on TransCanada’s Alaska Pipeline Project natural gas pipeline.
Tony Palmer, TransCanada vice-president of Alaska development, said the two companies will now jointly advance all aspects of the projects: technical, financial, and regulatory. The companies also will share costs, with TransCanada maintaining a majority interest in the project. Neither Palmer nor Marty Massey, ExxonMobil Production Co. US joint interest manager, would divulge specific percentages of ownership. The two addressed media in a conference call following the announcement.
Palmer noted that the state of Alaska had reviewed the arrangement and determined that no action was required under the terms of the Alaska Gasline Inducement Act (AGIA). Both emphasized that TransCanada’s obligations under AGIA remained entirely with the company, with Massey stating that ExxonMobil was in full support of AGIA and that it would help TransCanada meet its obligations under the act.
Massey later said ExxonMobil had not asked the state for any fiscal discussions as part of joining the project and that the company recognized AGIA as the proper forum in which to address fiscal terms.
TransCanada Alaska Co. LLC and Foothills Pipe Lines Ltd. submitted an application in November 2007 under AGIA to build a 1,700-mile, 48-in. OD natural gas pipeline with 4.5 bcfd capacity to Alberta from a new natural gas treatment plant on Alaska’s North Slope (ANS). TransCanada was awarded the AGIA license in December 2008 and has since been conducting engineering, environmental reviews, aboriginal engagement, and commercial planning toward a July 2010 initial binding open season. The open season will provide separate terms for ANS producers to wishing to ship their gas intrastate, as LNG, or via the pipeline to Alberta and beyond.
TransCanada and ExxonMobil will increase preopen season spending on the project to $150 million from a previously budgeted $83 million. The companies anticipate a late-2018 startup.
BP PLC and ConocoPhillips (as Alaska Gas Pipeline LLC) have been pursuing their own 4-bcfd Alaskan gas pipeline project, Denali, which also has an open season slated for 2010 (OGJ, Feb. 9, 2009, p. 54). Following the open season, the companies plan to file for certification from the US Federal Energy Regulatory Commission and Canada’s National Energy Board for authorization to move forward with the project. TransCanada already has NEB authorization for its project.
ConocoPhillips submitted a proposal under AGIA which the state said failed to meet the act’s criteria. BP and ExxonMobil did not submit AGIA applications.
Massey remarked repeatedly that ExxonMobil joined the TransCanada project because it provides “the best opportunity to bring all interested parties together,” including BP and ConocoPhillips. He also said it has always been ExxonMobil’s position that it would take all four companies and the state working together to get a pipeline built.
When asked if the agreement between ExxonMobil and TransCanada left room for other companies to subsequently join the project, Palmer said TransCanada would still give equity status to producers willing to commit a threshold amount of natural gas for shipment. Palmer also emphasized that access to the pipeline would be provided to all potential customers, not just the majors.
US Secretary of the Interior Ken Salazar described the agreement as “a significant step forward on a project very important to the president and the Department of the Interior as a way to get American energy to the Lower 48. We recognize there are two very strong project proposals, both aiming toward a 2010 open season and both now supported by major gas producers that control vast proven reserves of North Slope gas. We look forward to working with all stakeholders involved with this project.”
Alaska Gas Pipeline awarded a front-end engineering and design contract to Fluor WorleyParsons Arctic Solutions in February for a 5-bcfd gas treatment plant to process gas delivered through Denali. The plant would be the world’s largest, with process modules weighing up to 9,000 tons (OGJ Online, Feb. 11, 2009).
TransCanada’s pipeline would also include a gas treatment plant. Ownership of the pipeline, gas plant, and all other facilities would be fully integrated between the two companies, Palmer said, while conceding that ExxonMobil’s expertise in gas treatment would likely see it take the technical lead in that area while TransCanada focused on the pipeline.
Contact Christopher E. Smith at firstname.lastname@example.org.