Alaska Gas Pipeline Action Heats Up

U.S. regulators approved a plan by TransCanada Corp. to solicit interest from oil and gas producers in the multibillion-dollar natural gas pipeline the company and its engineering partner, ExxonMobil, want to build from Alaska to Canada and ultimately into the continental United States.

In January, TransCanada and ExxonMobil applied to the Federal Energy Regulatory Commission (FERC) for permission to build two potential Alaska gas pipelines.
The primary project would be a $32-41 billion, 1,700-mile pipeline from Prudhoe Bay to Alberta, Canada that would connect with TransCanada's existing pipeline system that carries natural gas into the U.S. The other project would be an 800-mile pipeline that would ship natural gas to a port in southern Alaska where it would be liquefied for transport to Asia and other foreign markets. TransCanada and ExxonMobil plan to build one or the other project, based on which one gets the most interest from potential customers.

TransCanada plans to solicit interest from natural gas producers through an open season process, the plans for which FERC approved, with conditions, on March 21. As a pre-condition, FERC said TransCanada will have to immediately open its data room to allow prospective bidders adequate time to review "needed information," such as costs and fees.

TransCanada plans to hold its open season for the Alaska gas pipeline projects between April 30 and July 30. The long-haul pipeline would ship up to 4.5 Bcf/d of natural gas and could be expanded to carry 5.9 Bcf/d.

Denali Open Season
TransCanada’s pipeline project competes directly with a pipeline planned by a joint venture owned by BP and ConocoPhillips called Denali. Denali – The Alaska Gas Pipeline LLC – filed its open season plan on April 7 with FERC. The filing outlines the commercial terms, technical plans, estimated costs and projected rates for the project.

The Denali Project consists of a gas treatment plant (GTP) on the Alaska North Slope, transmission lines from the Prudhoe Bay and Point Thomson fields to the GTP, and a mainline that will cross Alaska into Canada with its terminus at Blueberry Hill, Alberta. Also included will be delivery points along the route to help meet natural gas demand in Alaska and Canada. Denali's cost estimate for the GTP and mainline is $35 billion (2009 US$). Denali expects the project to be in service in 2020.

"Since its inception in 2008, Denali has invested over $140 million and over 600,000 man-hours to significantly advance this project", said Bud Fackrell, president of Denali. "Our commercial offer includes competitive transportation rates and at the same time recognizes the significant risk that both Denali and its customers will take."

The Denali Project has been designed to deliver approximately 4.5 Bcf/d of natural gas to North American markets. The GTP at Prudhoe Bay will remove CO2 and dehydrate, compress and chill the gas in preparation for transport down the mainline. When completed, the GTP will be the largest facility of its kind in the world.