ConocoPhillips rep: No wavering on Alaska gas line

[October 23, 2010]  JUNEAU, Alaska (AP) -- ConocoPhillips isn't wavering from its support for a proposed natural gas pipeline in Alaska, a company spokesman said Tuesday.

Spokesman John McLemore's statement of support came after CEO Jim Mulva told The Financial Times of London the company would reassess the economics of the project it's pursuing with BP PLC amid a rise in shale gas opportunities because of advancements in drilling technology.

The so-called Denali project is one of two proposals that would bring gas from Alaska's North Slope to the North American market. It is in the midst of an open season to court gas producers and seek shipping commitments. That process ends Monday.

After that, McLemore said the company will consider factors like market response, long-term gas prices, supply forecasts and tax rates in the state to evaluate its next step.

For years, Alaskans have anticipated a major gas line as a way to help shore up royalty revenues amid projections of a continued decline in North Slope oil production. While oil remains king here -- and politicians are looking at ways to encourage greater investment and development -- estimates have put proven gas reserves on the North Slope at 35 trillion cubic feet.

But only one line will be built -- if one gets built at all. Some fear the state's window of opportunity to supply gas to the Lower 48 has closed -- or narrowed significantly -- with the rise of shale gas; others disagree, and say Alaska shouldn't give up on the market. Still others say there remains potential for exporting gas overseas.

The market will dictate the next steps. Denali spokesman Dave MacDowell said there have been no talks with TransCanada Corp., whose competing project has the promise of up to $500 million from the state, to merge the plans. Denali is opposed to aspects of the Alaska Gasline Inducement Act -- championed by then-Gov. Sarah Palin -- under which TransCanada and its partner in the venture, Exxon Mobil Corp., are moving ahead.

TransCanada reported in July, at the end of its open season, that it had received multiple bids from "major industry players and others" that want to use its proposed line. The next phase -- which Denali will soon be entering, pending the receipt of bids -- is a monthslong process of negotiations with would-be shippers aimed at securing binding agreements about how much pipeline capacity a shipper would use and for how long.

Gas producers also want long-term assurances from the state about how the gas flowing through the pipeline will be taxed.

TransCanada and Denali have each put forth plans to deliver about 4.5 billion cubic feet of gas per day to North American markets by larger lines to Canada; each aims to be in service by about 2020. Denali has estimated its project will cost $35 billion, while TransCanada has put its figure at $32 billion to $41 billion. TransCanada also has offered a shorter, cheaper option: a $20 billion to $26 billion line that would lead to a liquefied natural gas facility that could export fuel by ship.

Denali hopes to know by March whether it can reach agreements with potential shippers -- and whether there's enough interest to move ahead, MacDowell said.

MacDowell has said Denali would consider a liquefied natural gas option if that's what customers wanted.

[Associated Press; By BECKY BOHRER]

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