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TransCanada Wants Equity Partners for Alaska Gasline

TransCanada Corp. hopes to secure commitments from at least the top three Alaska natural gas producers before it launches an open season in July 2010 for its proposed Alaska gasline, CEO Hal Kvisle said last week.

The Calgary-based pipeline company has been talking with ExxonMobil Corp., BP plc and ConocoPhillips for "some time" about the Alaska gasline, Kvisle told energy analysts during an earnings conference call. As proposed, the gasline would carry up to 4.5 Bcf/d from the North Slope to the Lower 48.

"We are in discussions today and we have been in discussions for a long time," Kvisle said. "We tend to try to negotiate with shippers the precedent agreements up front [so that there are] agreements in place that meet their needs before there is an open season."

Alaska Gov. Sarah Palin in August signed a bill that authorized the state to award a license that would allow TransCanada Alaska to begin developing a 1,715-mile gasline from a treatment plant at Prudhoe Bay to the Alberta Hub (see NGI, Sept. 1). TransCanada has not yet received the license, but Kvisle expects it to be awarded in late November, within the 90-day period that began after Palin signed the bill into law.

TransCanada's pipeline may have the state's blessing, but it faces competition from Denali, a similar gas pipeline that was put on the drawing board by BP and ConocoPhillips a few months ago (see NGI, June 30). Kvisle said he thinks that TransCanada's project may be more attractive to producers in the current market environment.

"First of all, our plan is fairly well laid out in the AGIA [Alaska Gasline Inducement Act] filings with the state of Alaska," said Kvisle. "The first critical step" is the open season, but he noted that there are "two aspects" to completing the open season. "There is a formal open season for parties to nominate for capacity for arrangements on the pipeline, and that could be from existing producers and those exploring and producing there. We expect to see commitments from both camps there."

TransCanada "made it clear in the AGIA filings that we are prepared" to offer an equity stake in the project, Kvisle said. "That's a fairly significant statement. We don't offer an ownership in all of our pipelines, but we would in return for long-term shipping commitments. It's a very complicated process, and there are many issues to discuss..."

TransCanada actually has been negotiating with the producers about a gasline from Alaska for a long time -- well before the AGIA filing, Kvisle admitted. "We hope to have it greatly progressed over the next 18 months as we go into open season in mid-2010."

Asked if he thought BP and ConocoPhillips might walk away from the Denali proposal, Kvisle said it was too soon to say. "We simply put to them the advantages of being involved in our project, and we noted that our project is strongly supported by the state of Alaska, and that's pretty important. We are having discussions on many, many issues. But they won't walk away from their project until everything is agreed between us."

TransCanada also is working on possible commitments for capacity on the gasline with other Alaska producers, said Kvisle. However, he noted that the other aspect is to secure all relevant U.S. and Canadian permitting to build the pipeline.

"It's obviously important to get regulatory permitting from the Federal Energy Regulatory Commission and from the Northern Pipeline Agency [in Canada] for that portion of the pipe that would go through the Yukon and northern British Columbia," he said. "We are commencing work on the regulatory front, and there's a fair amount of time to do that...

"Historic projects sometimes tend to get ahead of themselves, and we have to get ahead of the regulatory issues, so our focus will be there." It is "reasonable" to think that discussions would be ongoing with producers over the coming 12-18 months, said Kvisle.

TransCanada reported a 20% increase in quarterly earnings, and its financial position is "solid," said Kvisle. The company earned C$390 million, up from C$324 million in 3Q2007. Revenue fell slightly to C$2.14 billion from C$2.19 billion.

"Over the long term, we will continue to expand our portfolio of natural gas and crude oil pipelines, power generation plants and natural gas storage facilities by advancing projects like the Alaska pipeline project, Alberta system expansions and highly efficient power plants in Canada and the United States," Kvisle said.

TransCanada also is participating in the Mackenzie Gas Project, which would carry gas from the Mackenzie Valley to Canadian and Lower 48 markets. To date TransCanada has spent around C$140 million. Timing for the project, however, "continues to be uncertain."

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