BP: Gas pipeline does not make economic sense

Posted: Friday, November 30, 2001

ANCHORAGE -- More than $100 million spent on studying the feasibility of delivering North Slope gas to the Lower 48 indicates the project does not make economic sense, BP's gas expert told industry executives on Thursday.

BP Vice President Ken Konrad told a meeting of the Resource Development Council that Alaska's big three oil companies have spent the last year and large amounts of money evaluating the project. Work on the data will be done by the end of the year and a report completed as early as February or March, he said.

Konrad expects the report to say the project is not economically viable right now.

"We simply cannot invest in projects where risks outweigh rewards," he told the group. That would put the huge international company out of business, he said.

BP, ExxonMobil and Phillips Petroleum need federal legislation that would speed permitting for the pipeline, he said, calling that legislation a "must have."

Delays in getting a national energy bill passed have not helped the project, Konrad said.

There was some movement in that area Thursday. Alaska Sen. Frank Murkowski and other Senate Republicans won the right for a vote next Monday on an energy bill that includes drilling in the Arctic National Wildlife Refuge.

The state also has failed to provide the companies with a clear understanding of how taxes and royalties from the proposed pipeline would be handled, Konrad said.

"This is by no means to say we have given up," he said. "Alaska gas can and will happen. We just need to get everyone in the same boat rowing at the same time."

Sen. John Torgerson, chairman of the Joint Committee on Natural Gas Pipelines, told the group that the state won't back off its commitment to a southern pipeline route along the trans-Alaska oil pipeline and Alaska Highway to Alberta. State politicians believe that route would benefit Alaskans most.

A route across the Beaufort Sea then south through Canada is favored by some Canadians because it would tap rich reserves being developed in the Mackenzie Delta.

Roger Simmons, consul general of Canada, assured the group that the Canadian government is neutral on a route. He said his government believes the gas producers should make that decision.

Joe Marushak, vice president for Phillips Alaska, said his company continues to support the southern route because Phillips believes it will be easier to permit and to expand in the future. Phillips announced earlier this month it would merge with Conoco Inc. in a $15.4 billion deal that would create the nation's third-largest oil and gas company.

BP is not interested in fighting the state, or any other government, over a preferred route, Konrad said.

"No project will go ahead unless all governments agree to it," he said.



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