Comment

July 2009

Exxon joins Alaska government/TransCanada project

It may become the one of the world’s biggest engineering projects: The $26 billion natural-gas pipeline would connect Alaska’s North Slope to Chicago.

Exxon Mobil Corp. said in June that it is joining an existing effort by TransCanada Corp. to build a pipeline.

Exxon controls the largest share of natural gas on the remote North Slope and its involvement is critical to any project.

The Wall Street Journal reported Exxon’s announcement tilts the scales in favor of the pipeline going forward. It faces numerous challenges and is still far from becoming a reality. Among the most serious questions it faces is whether the Alaskan gas is even necessary.

North America is in the midst of a natural gas glut, driving down prices, and observers believe liquefied natural gas imports are set to grow as overseas producers seek to unload their gas in the U.S.

The TransCanada proposal already has the backing of the Alaskan government, which last August passed legislation to provide up to $500 million in funds to pay for preliminary work.

Even moving quickly, the pipeline will not receive certification from the Federal Energy Regulatory Commission until 2014, and would not begin moving its four billion cubic feet of natural gas daily until the end of the next decade.

BP PLC and ConocoPhillips, which both control large gas deposits in Alaska, are working on a competing pipeline proposal, but it does not have the support of the state government.

The North Slope holds some 35 trillion cubic feet of known gas reserves. The state estimates undiscovered reserves could bump that figure to as much as 250 trillion cubic feet. By comparison, U.S. consumption in 2007 was just over 23 trillion cubic feet.