BP and ConocoPhillips Tuesday announced a 4 Bcf/d Alaska gasline project, called Denali — The Alaska Gas Pipeline, to commercialize the state’s vast North Slope gas reserves. They claimed the project would be the largest private-sector construction ever in North America.

The move comes as state lawmakers are considering the only proposal for a gasline to qualify under the state’s Alaska Gasline Inducement Act (AGIA) process, a project proposed by TransCanada (see Daily GPI, March 31). ConocoPhillips previously proposed a gasline project outside of the AGIA process, which the administration of Gov. Sarah Palin declined to consider but in which lawmakers expressed further interest (see Daily GPI, March 18; Feb. 25; Jan. 11).

ConocoPhillips and BP are two of the big three producers on the North Slope, the other being ExxonMobil. Last month ExxonMobil told the state it “plans to be a co-owner” in a gasline to the extent of its share of the system’s throughput (see Daily GPI, March 11). On Tuesday the company told NGI that it was invited to join the Denali project but hasn’t had time to consider it fully.

BP and ConocoPhillips said they plan to spend $600 million to reach the first project milestone — an open season — commencing before year-end 2010. Following a successful open season, a process during which the pipeline company seeks customers to make long-term firm transportation commitments to the project, the companies said they would obtain Federal Energy Regulatory Commission (FERC) and National Energy Board (NEB) certification and move forward with construction. The FERC and NEB certificates are the critical permits that provide government authorization to construct a pipeline.

“This project is vital for North American energy consumers and for the future of the Alaska oil and gas industry. It will allow us to keep our North Slope fields in production for another 50 years,” said BP CEO Tony Hayward. “The Alaska gas pipeline will be an historic project and we are pleased to be working with ConocoPhillips to move it forward.”

An ExxonMobil spokeswoman told NGI that the company had been invited by the Denali partners to participate in the project but that was only a few days ago and did not allow enough time for ExxonMobil to consider the project prior to its announcement Tuesday.

“We were invited to participate,” said spokeswoman Margaret Ross. “However, ExxonMobil was only made aware of the ConocoPhillips-BP plan a few days prior to the announcement. We need to better understand their approach to ensure that it will lead to a commercially viable development on a cost and schedule basis that will deliver maximum benefits to the State of Alaska, the producers and consumers in the United States and Canada. ExxonMobil remains committed to commercializing North Slope gas resources. We continue to evaluate all options for pursuing an Alaska gas pipeline, including the State of Alaska’s consideration of a project under the AGIA process.”

During a press briefing Tuesday, Palin was upbeat about the Denali proposal and praised the competition it brings to the gasline evaluation process, although she seemed to be rather short on details of the project herself. She said consideration of TransCanada’s proposal under AGIA will continue as planned and the Denali project will be considered alongside the AGIA process. AGIA findings on the TransCanada proposal are to be presented to lawmakers beginning May 19 (see Daily GPI, March 31).

The Palin administration has sparred with the big North Slope producers, particularly ExxonMobil, over the the time it has taken them to develop state resources for which they’ve held leases for many years. Alaska’s Point Thomson leaseholders recently offered the state a series of steps they will take by 2013 to develop the long-dormant North Slope gas field, which the state has been trying to reclaim in court. ExxonMobil Corp., the operator of the Point Thomson Unit, is leading the proposal, which includes BP Exploration (Alaska) Inc., Chevron U.S.A. Inc. and ConocoPhillips Alaska Inc. (see Daily GPI, March 28).

When asked about ExxonMobil during the press briefing, Palin said the company’s absence, at least so far, from the Denali proposal was not a cause for concern. “Don’t let the door hit you in the stern on the way out if you choose not to participate in progressive development of Alaska’s resources,” Palin said by way of describing the sentiment toward ExxonMobil she perceives to be held by Alaskans.

Nevertheless, ExxonMobil still sees itself as very much in the game, according to Ross.

“An Alaska gas pipeline project has the potential to increase ExxonMobil worldwide gas production by 10% and add over one billion oil-equivalent barrels of proved reserves — nearly enough to replace a full year of our worldwide production,” Ross said. “Given the significant value to our company, we are keen to be part of a project that commercializes the gas.”

ConocoPhillips also would like to see gas molecules and dollars flowing from the North Slope.

“Our goal of bringing Alaska’s North Slope gas to market is becoming a reality. Denali — The Alaska Gas Pipeline project will deliver natural gas to meet North America’s growing energy needs,” said ConocoPhillips CEO Jim Mulva. “ConocoPhillips is pleased to be working with BP on this project; our companies have a long history of successfully developing projects on Alaska’s North Slope, in Canada, and around the world. The time is right to start moving this project forward.”

The project consists of a gas treatment plant on Alaska’s North Slope and a large-diameter pipeline that travels more than 700 miles through Alaska and then into Canada through the Yukon Territory and British Columbia to Alberta. Should it be required to transport gas from Alberta, the project would also include a large-diameter pipeline from Alberta to the Lower 48. BP and ConocoPhillips said they will seek other equity partners, including pipeline companies, that can add value to the project and help manage the risks involved.

Also on Tuesday, Enbridge Inc.’s Ron Brintnell, director of gas development, said the company was interested in taking a 10-20% stake in the Denali project, Reuters reported. It said Brintnell has talked with the Denali partners about participating.

Drue Pearce, coordinator of the federal government’s Alaska gasline activities, said she was encouraged by the Denali announcement. “An Alaska gas pipeline is a key component for the nation’s energy security,” said Pearce. “It will provide a stable supply of affordable natural gas to the Lower 48 for decades to come.

“Two North Slope producers are committing to going to an open season and engaging FERC in the licensing process. This appears to be an important advance beyond any producer’s previous commitments. We look forward to working with them and any other potential federal applicant.”

The companies have assigned staff to the joint project team, which will be ramping up over the coming months. A new project headquarters in Anchorage will be identified and a new company formed to manage the project. ConocoPhillips’ previously announced intent to conduct summer field work in Alaska will be rolled into the joint effort.

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