14 August 2008

Pipeline power struggle in Alaska persists

Alaska has chosen the organization it wants to build a natural gas pipeline. The oil companies that own the rights to the gas are not lining up in support. What now?

Dow Jones Newswires reported it is a race and it is heating up.

U.S. oil major ConocoPhillips said Friday it hopes to win over Exxon Mobil Corp., which controls most of the gas reserves there.

Conoco and BP are developing an Alaska natural gas pipeline, called the Denali Gas Pipeline, which competes directly with a project TransCanada Corp. is pursuing with support from the Alaskan government.

(InTech reported on the pipeline in its August issue, http://www.isa.org/InTech/20080802)

Conoco favors "taking ExxonMobil into the Denali project," said Brian Wenzel, Conoco's vice president of Alaska Gas Development.

ExxonMobil has not committed to either pipeline.

The company said Thursday that it wants to work with BP, Conoco, TransCanada, and the Alaskan government to build a natural gas pipeline.

TransCanada has said Exxon's participation could be vital to its project.

One advantage of the TransCanada project is the state has guaranteed its shippers a 10-year production tax freeze. Under state law, the government can only provide tax incentives for one project, making it unlikely that Conoco and BP would be able to get tax incentives for theirs.

"The horse is already out of the barn, we've already picked someone with whom we've partnered," said Kurt Gibson, deputy director of the Alaska Division of Oil and Gas. "The TransCanada pipeline is the vehicle for fiscal certainty."

Calgary-based TransCanada plans to build a $26 billion, 1,715-mile natural gas pipeline from Prudhoe Bay, Alaska, to Alberta, Canada that would ship 4.5 billion cubic feet of gas per day.

The Conoco-BP Denali pipeline would run 2,000 miles, between Prudhoe Bay and Alberta, and would ship 4 billion cubic feet of gas per day. The companies have not said how much the project would cost. They did not need a state license to build a gas pipeline.

"The state of Alaska's support for TransCanada will not affect the Denali work program," said Bud Fackrell, president of the Denali joint venture.