BP and ConocoPhillips have combined resources to launch Denali, a new Alaska gas pipeline project aimed at commercializing Alaska’s North Slope natural gas in approximately ten years.
In a surprise announcement April 8 in Anchorage, the companies said Denali is a new project independent of all others, including the state’s Alaska Gasline Inducement Act (AGIA) process.
The pipeline will move four billion cubic feet of natural gas per day to markets, and will be the largest private sector construction project ever built in North America.
BP and ConocoPhillips plan to spend $600 million to reach the first major 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 intend to obtain Federal Energy Regulatory Commission (FERC) and the Canadian National Energy Board (NEB) certification and move forward with project construction. The FERC and NEB certificates are the critical permits that provide government authorization to construct the pipeline.
The project consists of a gas treatment plant on the North Slope and a 48-inch diameter pipeline that travels over 700 miles of 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 will also include a large diameter pipeline from Alberta to the Lower 48. Overall, the project covers 2,000 miles to Alberta, with potentially an additional 1,500 miles to Chicago.
BP and ConocoPhillips will seek other equity partners, including pipeline companies, who can add value to the project and help manage the risks involved.
The companies already 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.
The project does not require state permission or a license as envisioned under the AGIA process. Although it does not seek fiscal certainty initially, both BP and ConocoPhillips expect to discuss the sensitive issue with the Legislature and Governor Sarah Palin’s administration as the project moves closer to the open season and more data is accumulated.
ExxonMobil is not part of the new project, but BP and ConocoPhillips made it clear the company would be welcomed to partner with them in advancing Denali.
“We look forward to any progress they will be able to show us on this project,” said Governor Palin regarding the news. “Their decision to proceed is further proof that competition does work,” she said.
However, Palin noted the new project would not turn her administration from its review of a separate proposal from TransCanada, which is vying for an exclusive license under the state AGIA process. The administration plans to announce by May 19 if the TransCanada proposal maximizes benefits to Alaskans. Legislators are slated to meet in a special session beginning June 3 to discuss the administration’s recommendation.
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