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Major firms end bid to build gas line to Canada

Posted: May 17, 2011 - 8:42pm  |  Updated: May 18, 2011 - 7:31am

The Denali-The Alaska Gas Pipeline Project has come to a halt after BP and ConocoPhillips announced the economics don’t support the project.

The Alaska Gasline Port Authority applauds the companies for ending the open season as a result of the long-term collapse of North America gas markets, thus terminating speculation about whether the project would merge with the TransCanada/AGIA project.

“That’s a pretty telling result as far as what’s not going to happen, said General Counsel and Project Manager Bill Walker, adding, “Two of three potential major shippers have said the economics are not there.”

“I would challenge TransCanada to announce their results of their open season,” he said.

Walker said ExxonMobil should also release the results of its open season.

Walker said shale gas has played a significant role in the economics behind these projects, as well as the tariffs to the trading hub in Alberta. He said the price to get it there is greater than the market price.

Walker said the All Alaska Gasline, which accesses Asian markets, is the “only project left standing” because of the market conditions and because the Asian market is so strong.

“I see it as a chance for Alaska to truly open its doors right now,” said Walker.

Gov. Sean Parnell and Department of Natural Resources Commissioner Dan Sullivan also released statements on the gasline.

“While we dislike seeing the demise of any gas pipeline project before a gasline is underway, the silver lining here is that Denali’s announcement frees ConocoPhillips and BP to independently become partners in another Alaska gasline project,” Parnell states. “While the competition that drove progress on this important project has been welcome, it has always been universally understood that only one project would be built.”

His release states that Alaska recognizes that alignment among all stakeholders is necessary to advance a project of this magnitude.

It also states that a sound and durable fiscal framework regarding shippers’ future tax obligations can be reached through the Alaska Gasline Inducement Act’s regulatory and technical issues requirements. The release reads: “Alignment behind the Alaska Pipeline Project - because of the license held by its partner, TC Alaska - provides the perfect opportunity to begin that discussion.”

“Alaska has tremendous gas resources on the North Slope that need to get to market,” states Sullivan. “Completion of natural gas transportation infrastructure from the North Slope to commercial markets is a key to unlocking vast, untapped portions of our world-class basin to exploration and development—a basin that contains billions of barrels of oil and trillions of cubic feet of natural gas.”

U.S. Sen. Mark Begich expressed his disappointment in the Denali-The Alaska Gas Pipeline Project’s termination. In a release, he said, “Like many Alaskans, I am disappointed to hear today’s news that the Denali project is no longer pursuing the gas line. We’ve always known a gas line can only succeed if there is a market for the gas, and prices are low while supplies are plentiful in the lower 48 markets right now.”

“But this is also about planning for the long-term and the growing U.S. demand for gas, especially from utilities, could make the Alaska pipeline economically possible down the road,” he states. “There’s no doubt Alaska needs a gas line for 2020 and beyond to attract the investment dollars that will be necessary to produce more oil. I hope the state and the producers can all work together to move an Alaska gas line forward in the future. I stand ready with the rest of the Alaska Congressional Delegation to move increased loan guarantees forward to help secure a pipeline project.”

• Contact reporter Jonathan Grass at 523-2276 or jonathan.grass@juneauempire.com.

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