09-04-08 There is still a long way to go before BP and ConocoPhillips can start building a new joint pipeline to bring natural gas from Alaska to the lower 48 US states through Canada. Both oil giants announced that they will work together to build a pipeline referred to as "Denali -- the Alaska Gas Pipeline," that could move about 4 bn cf of natural gas a day from Alaska's North Slope to the rest of the US.
But experts, Alaskan authorities and even companies said the project needs to go through several lengthy steps, including the approval of the state and the US government, before it could be built.

Meanwhile, a competing proposal from Canada's biggest natural gas pipeline company, TransCanada, has already met Alaska's project guidelines. It is currently being considered by Gov. Sarah Palin's administration, which rejected an earlier bid from ConocoPhillips in January.
The announcement "does not seem to be anything too big," said Daniel Katzenberg, analyst at Oppenheimer and Co. "They still do not have approval from the state of Alaska or the US government to build it. They have been trying to get approval for 10 years, so it's not likely that it will happen quickly."

Katzenberg said the companies could be years away from getting the go-ahead from the state and the US government.
"And even once it's approved, it'll take 10 years to complete," he said. The companies expect to have the pipeline in service in about 10 years, BP spokesman Steve Rinehart said.

Alaska's North Slope holds around 35 tcf of proven natural gas reserves, with leases owned primarily by BP, ConocoPhillips and ExxonMobil. Long-held plans to connect this supply with the lower 48 states have been scuppered by a slump in natural gas prices, along with regulatory and political difficulties.
But prices are on the rise again and the outlook remains strong, with more US power generation switching to natural gas from coal amid a tightening in environmental laws. Currently, natural gas is the source of roughly one-fifth of US electricity supplies and an ingredient for making everything from plastics to fertilizer.

Meanwhile, production in Canada, the biggest supplier to the US by an overwhelming margin, is in decline. And more of this declining output is being sucked up by Alberta's booming oil sands industry, rather than heading south of the border.
When ConocoPhillips submitted its lone proposal in December, it was viewed as a thawing on the part of oil producers, which had been reluctant to work with Palin's new administration amid concerns over taxes and other terms. The oil companies had negotiated a tentative deal with the previous governor, but it ran into political trouble and was quickly killed.
"This is all good, it sounds great, this is good for Alaska," Palin said following the companies' announcement. "But there are going to be plenty of forms they need to fill out."

ExxonMobil isn't participating in the project, but a company spokeswoman confirmed that it has been invited to participate. Exxon spokeswoman Margaret Ross said the company hasn't had "substantive discussions" with Conoco and BP on their planned approach. She said ExxonMobil only became aware of their plans a few days before the announcement.
The announcement has had little impact on TransCanada's plans for its own $ 26 bn pipeline. The company has sought "alignment" with the North Slope producers and the Alaskan state, and will continue to do so, Tony Palmer, vice president of Alaska development, told.

TransCanada already has approvals granted by the Canadian government several decades ago for construction on Canadian territory, along with right-of-way through the entire Yukon -- a hurdle BP and Conoco would have to clear.
"We would continue to seek an alignment with them rather than a confrontation," Palmer said. Depending on regulatory approval, TransCanada's pipeline would be up and running by the end of 2017, initially carrying 4.5 bn cfpd across the lower 48 via the company's massive pipeline network.

BP and Conoco said they will combine their resources to spend $ 600 mm to reach the project's first major milestone, an open season, before the end of 2010. (An open season is a process during which customers are sought to make long-term firm transportation commitments to the project.)
If the open season is successful, the energy companies will seek Federal Energy Regulatory Commission and National Energy Board certification -- considered critical government authorizations -- to move forward with the project's construction.

The project will include a gas-treatment plant on Alaska's North Slope and a large-diameter pipeline that travels more than 700 miles through Alaska, then into Canada through the Yukon Territory and British Columbia to Alberta.
If it's necessary to transport gas from Alberta, the project will also include a pipeline from Alberta to the lower 48 states.