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ExxonMobil Coy on Alaska Gasline, Still Smarting Over Point Thomson

While TransCanada Corp. awaits the fate of its proposal in a state-sanctioned process for the development of a pipeline to tap Alaska's natural gas reserves and ConocoPhillips and BP plc say they're moving ahead with their similar project, North Slope major ExxonMobil Corp. said last week it is still weighing its options.

"As we continue to look for ways to move forward, we are evaluating the various proposals...and we are having some discussions around those proposals," said Henry Hubble, ExxonMobil vice president of investor relations during an analyst conference call last week. "Basically what we are looking for is the most effective way to get the maximum value for the state of Alaska, for ourselves, for production, and to move that ahead."

Hubble did allow that the company was invited by ConocoPhillips and BP to participate in their project. "We've talked to those companies, and we're evaluating the discussions from that," he said. "We've been asked to participate and we're looking at it." He declined to say whether ExxonMobil might become a partner, but he said the discussions to date had been "encouraging."

ConocoPhillips CEO Jim Mulva said last month that he hopes ExxonMobil joins his company and BP on the proposed $30 billion Denali pipeline project, which would connect natural gas fields in Alaska's North Slope to the Lower 48 (see NGI, April 28).

BP, ConocoPhillips and ExxonMobil are the three biggest oil and gas producers on the North Slope. They and the state have talked about commercializing North Slope gas reserves for years, but pipeline talks have always stalled. Last month BP and ConocoPhillips unveiled Denali -- The Alaska Gas Pipeline, which would carry up to 4 Bcf/d from the North Slope (see NGI, April 14). ExxonMobil in March had told Alaska officials that it planned to be a co-owner in an Alaska gasline to the extent of its share in the system's throughput (see NGI, March 17).

At this point the Denali project can still be viewed as a competitor to a proposal from TransCanada under the state's Alaska Gasline Inducement Act (AGIA). The pipeliner was the only company to make the cut for consideration of a project under AGIA (see NGI, Jan. 7). Findings of the panel reviewing TransCanada's proposal are to be presented to the state's lawmakers the week of May 19 (see NGI, March 31). A special legislative session on the matter has been called for June. Generally, the TransCanada and Denali proposals are similar, about 2,000 miles each with terminus at the Albert-British Columbia border. Some have speculated that TransCanada and the producers could work together on a pipeline. Enbridge Inc. has said it sees a role for itself in pipeline development as well.

Regardless what the outcome is for TransCanada, ConocoPhillips and BP have said they're moving ahead with their project and are unaffected by activities under AGIA. "Whether [TransCanada's AGIA license] is awarded or not, we will move forward with this project. Therefore, we will obviously watch with interest a special session, but it doesn't directly impact our project," Angus Walker, BP Exploration (Alaska) Inc. senior vice president told the Anchorage Chamber of Commerce late last month, as reported by Reuters.

Meanwhile, ExxonMobil and its producer partners in the Point Thomson Unit on the North Slope lost another round in their battle with the state to retain leases on the unit despite years of development inactivity, which has antagonized the governor and lawmakers. Late last month Alaska's Department of Natural Resources terminated the Point Thomson Unit, and ExxonMobil said it would appeal (see NGI, April 28).

During the call with analysts, Hubble linked the ultimate outcome at Point Thomson with the future of a gasline.

"The success of the Alaska pipeline is potentially tied to the Point Thomson resources," Hubble said said. "Point Thomson is important to the pipeline's success. It's hard to make sense of the pipeline without the development of Point Thomson.

"Frankly, we were surprised and disappointed in the Department of Natural Resources decision there, and we'll be pursing our rights in this area. We will be asking for a rehearing on that. We laid out our commitments to bring that gas production on, to develop that production, and frankly, we were surprised. We will be pursing a rehearing and our rights in that regard."

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