Denali gas line group sets open season

Organization led by BP, ConocoPhillips cites uncertainties

Posted: Monday, January 18, 2010

The Denali gas pipeline group led by BP and ConocoPhillips will begin its open season process to solicit gas shipper commitments in April, with the actual open season to begin in July and end in October.

But Denali President Bud Fackrell in a written statement discussing the plan expressed concerns about the uncertainties hanging over the large project, including newly discovered Lower 48 gas supplies and lack of a fiscal agreement with the state for North Slope producers.

An open season plan to be filed with the U.S. Federal Energy Regulatory Commission in April will be reviewed by FERC and the public for 90 days, followed by the 90-day open season, Denali spokesman Dave MacDowell said.

"At the close of the open season there will be a period of negotiation with potential shippers, and we are unsure how long this will take," MacDowell said.

Denali is getting its project before potential customers a few weeks after its rival, TransCanada Corp., which is leading a separate Alaska gas pipeline initiative. TransCanada will begin its open season in May, the company has said. Both groups are working on a $30 billion-plus 1,800-mile gas pipeline from Alaska's North Slope to Alberta.

"Denali's open season will provide potential shippers the best opportunity to evaluate the economics of North Slope gas sales to the Lower 48 market. I expect that the quality and timing of our open season will be viewed positively in the marketplace," Fackrell said. "Denali has invested over $130 million moving the project forward over the last 20 months, primarily in the areas of field work, engineering and stakeholder engagement. These work products underpin a robust project plan and cost estimate, which are essential parts of Denali's commercial offering."

Fackrell said he is worried, however, that shippers may hesitate to make commitments given uncertainties that include an increased Lower 48 gas supply, unresolved legal issues at the Point Thomson gas field, which would supply a pipeline, and the lack of fiscal terms agreed between producers and the state of Alaska.

"Our potential shippers have publicly indicated that resolution of those issues will be important in their decision to make the multi-billion-dollar commitments necessary to move the project forward," Fackrell said in the statement.

Potential shippers include BP and ConocoPhillips, Denali's owners, which own substantial gas reserves on the North Slope, along with ExxonMobil and Chevron Corp., which are not part of Denali. ExxonMobil is working with TransCanada in its preparations for an open season but has not yet fully signed on with TransCanada, citing the need to secure fiscal terms with the state.

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