Exxon takes role in massive pipeline project to bring Alaskan natural gas to lower 48

Exxon brought in on Alaskan pipeline project

ANCHORAGE, Alaska — Exxon Mobil Corp. will partner with TransCanada to help build a massive pipeline capable of bringing natural gas from Alaska to the lower 48 states, the companies said Thursday.

The $26 billion pipeline could carry 4.5 billion cubic feet of gas per day from the North Slope through Alberta, Canada, where it would travel along secondary supply lines throughout the U.S.

Exxon, the world’s largest publicly traded oil company, will become an equity partner in TransCanada Alaska Co. but has not agreed to state licensing terms, according to state Sen. Lesil McGuire, R-Anchorage.

Exxon will make a $150 million capital investment in the company, which is licensed by Alaska to build a natural gas pipeline, McGuire said.

TransCanada was awarded an exclusive state license with up to $500 million in incentives last summer. The company controls no gas and critics said it would have trouble securing financing alone.

Even then, however, Exxon had become a part of the story.

The chief executive of TransCanada Corp. caused a stir in the Alaska legislature almost immediately after lawmakers awarded the exclusive license.

Hal Kvisle was quoted by Toronto’s Globe and Mail saying, “Nothing goes ahead until Exxon is happy with it.”

Kvisle later wrote to one lawmaker, “Clearly, neither Exxon Mobil nor any other party has a veto over the manner in which the State of Alaska deals with its oil and gas assets.”

Exxon controls more known reserves in Alaska’s North Slope than any other company.

Two other petroleum giants with substantial North Slope holdings, ConocoPhillips and BP PLC, have been developing a competing pipeline project. The collaboration is called Denali-The Alaska Gas Pipeline LLC.

Denali spokesman Scott Jepsen said Thursday that Exxon’s intent would not affect plans for the BP-ConocoPhillips joint venture. He said the partnership spent about $55 million last year on field work, engineering and planning and has an even broader work program scheduled this year.

“We’re still focused on our 2009 work plans,” Jepsen said. He noted the project, with minimal delays, could begin shipping gas in 2018.

BP spokesman Ronnie Chappell said the London-based oil giant would have no comment beyond Denali’s. Houston-based ConocoPhillips noted in a statement that it is a major owner of North Slope oil and gas leases and “will look for the best overall commercial and technical solution for moving Alaska gas to North American markets.”

“Until we have an opportunity to review the details behind the ExxonMobil/TransCanada announcement, it would be premature for us to provide any specific comments about their plan,” Conoco said in a statement. “… We will study the details behind this new project as well as monitor progress on the Denali project.”

But the Denali project has some doubters.

“Any project that doesn’t involve Exxon is not going to work,” said Fadel Gheit, an oil analyst at Oppenheimer & Co. “They have the largest share of gas, and they’ve made it very clear they’re not going to do anything unless the fiscal terms are agreed upon. There’s no question in my mind the other guys are going to have to shift their positions and come with Exxon.”

U.S. Sen. Lisa Murkowski, R-Alaska, called the TransCanada-Exxon agreement a major sign of progress.

“A gas line is absolutely essential for Alaska’s economic future and for the nation’s energy security,” Murkowski said.

Murkowski is the daughter of former Gov. Frank Murkowski, who was defeated by Gov. Sarah Palin. As governor, Murkowski backed a pipeline deal that he negotiated in secret with major energy companies. Those talks failed.

Palin claimed the bidding process for the pipeline was fair, but an AP investigation late last year determined that her administration crafted terms that favored a few independent pipeline companies and ultimately benefited the winner, TransCanada.

In March, with natural gas prices tumbling, lawmakers put forth a resolution asking that the Palin administration review the financial terms awarded to the company.

Associated Press reporters John Porretto in Houston, and Justin Pritchard and Garance Burke, in Baltimore, contributed to this report.