A BP-ConocoPhillips venture planning to build a huge natural gas pipeline from Alaska to the Lower 48 is in early talks to join a competing project headed by TransCanada Corp. and Exxon Mobil Corp. , according to a source familiar with the projects.
The BP-ConocoPhillips project, known as Denali, would likely be shelved as the two companies team with the TransCanada project, said the source, who is not authorized to discuss the status of the projects and requested anonymity. With a price tag up to $40-billion (U.S.), it's long been thought that only one of the projects would be built.
Dave MacDowell, a spokesman for Denali, said he wasn't aware of such discussions but noted that BP and Conoco-Phillips have said they are open to "considering involvement of any entity that adds value and takes on risk."
The number of people working in Denali's offices in Alaska has dropped in the past few months, he said, but that has to do with the project moving from initial studies to a planned open season, when it will gauge interest from North Slope producers.
Discussions for a natural gas pipeline from Alaska's North Slope started soon after the Trans-Alaska Pipeline System started moving oil in 1977. Since then, most natural gas produced along with oil on the North Slope has been re-injected into the ground to help push out more oil.
The natural gas pipeline would be among the largest energy infrastructure projects in the world. It would include a natural gas processing plant on the North Slope and 2,700 kilometres of pipe that would most likely run to Alberta. There, existing pipelines would carry the gas to U.S. markets.
Alaska granted Trans-Canada a license to build the pipeline in January 2008 following a public bidding process initiated by then-Alaska Gov. Sarah Palin. She cancelled a pipeline deal that her predecessor had negotiated in closed-door sessions with the three major North Slope producers, Exxon Mobil, BP and ConocoPhillips.
The three producers did not take part in Ms. Palin's state bidding process, saying it did not provide the kind of tax and tariff assurances needed. ConocoPhillips announced its competing project shortly after, and BP joined in that project in April 2008.
Pending federal approval in the U.S. and Canada, construction may start in 2016 and operations begin in 2018.