Gas line plan: The ins and outs

Alaska Newspapers Inc.
editor@alaskanewspapers.com

April 08, 2008 at 2:32PM AKST

What:

BP and Conoco Phillips have combined resources and plan to launch an Anchorage-based company called, Denali – The Alaska Gas Pipeline, to get Alaska’s North Slope gas reserves to markets within 10 years.

The companies, which control more than 60 percent of the North Slope’s natural gas, plan to spend $600 million to reach the first major project milestone, an open season before the end of 2010. Field work begins this summer.

Will BP and ConocoPhillips really build a gas pipeline?

In 2001, BP, Exxon and Phillips Petroleum (before it merged with Conoco Inc.) explored a gas pipeline. They dropped the idea because it was too expensive.

Today, greater demand and prices make the project more feasible, said Doug Suttles, president of BP Alaska, during a press conference.  

“Fundamentally for BP, the change is the outlook on energy and energy prices,” said Suttles.

The companies are not asking for government subsidies to build the project, which will be the largest private-sector construction project in North America, officials said.

“It is the real deal,” said Jim Bowles, president of Conoco Phillips. “You’re seeing both us up here indicating we’re embarking on a $600 million venture. That’s serious money. We’re not asking for support on that. We’ve let contracts on summer field work. That’s started. We anticipate spending $100 million over the next 12 months.”

Obstacles:

They are numerous, including that the project will require more than 1,000 permits from regulatory agencies in the U.S. and Canada, including critical ones from the Federal Energy Regulatory Commission and the National Energy Board in Canada after the open period.

It will need more than 5 million tons of steel, so soaring steel prices could kill it. The price and demand for natural gas must also remain high.  

First step:

Employ 150 Alaskans starting this summer who will explore a possible pipeline route and begin establishing a cost estimate. The summer work will include collecting data, investigating stream crossings and possible archaeological sites, and preparing environmental assessments.  

How:

BP will build a gas treatment plant near existing Prudhoe Bay facilities to remove water from the gas and take other steps to prepare the gas for shipment. The buried pipeline will travel 700 miles from the North Slope in Alaska, cut through Alberta, Canada, and end in Chicago. The line will transport 4 billion cubic feet of gas a day, providing 6 to 8 percent of Lower 48 natural gas needs.

Potential partners:

BP and Conoco Phillips said they’re open to other partners joining them, including ExxonMobile, which controls the largest portion of the Slope’s natural gas reserves, TransCanada and the state.

Instate lines:

At least five points will deliver gas to places such as Fairbanks and Southcentral Alaska. The company will spend $30 million to train Alaskans, study the offtake points and upgrade roads, bridges and ports.

More information: http://www.denali-thealaskagaspipeline.com/