Exxon, TransCanada pact may involve little more than engineering

ANCHORAGE - TransCanada on June 11 announced that it has an
agreement with Exxon Mobil Corp. for the two to work together on a natural
gas pipeline from Alaska to the Lower 48. But that agreement may amount to little more than Exxon doing some of the engineering for TransCanada.
"We are pleased that TransCanada and ExxonMobil have reached
agreement on initial project terms to progress this exciting initiative," Hal Kvisle, TransCanada president and chief executive officer, said in a written news release about the partnering.
The news release contained no details, but the companies teleconferenced with reporters later in the day to discuss the agreement. In the teleconference, the two companies said Exxon will participate in all aspects of TransCanada's project: technical, commercial, regulatory and financial. TransCanada will retain the lead in its project and be majority owner.
Some Alaska state legislators were briefed by TransCanada earlier in the day,
and at least one emerged highly skeptical about the importance of the
development. "My take is what's going on here is a completely overblown media
circus," said Anchorage Rep. Mike Hawker, whose wife works for Conoco in its Cook Inlet operations.
Hawker said that the companies will announce the formation of an "integrated project team."
"The way it's been explained to me is that all this project team is, is they've hired Exxon Mobil Corp to do the front end development work on the gas treatment plant which is something TransCanada doesn't do. That's oil industry technology, that's not pipeline technology," he said.
He said TransCanada is basically hiring Exxon as a subcontractor. "Exxon will pass its expenses back to TransCanada, TransCanada will bill half of them back to the state of Alaska," he said.
That the state will reimburse Exxon for its gas pipeline costs is raising eyebrows. But that repayment can't be avoided under the gas line inducement law.
"Yeah, nobody likes Exxon, and how they treated the Exxon Valdez plaintiffs even recently bothers me terribly, and maybe this means we will give them a little bit more scrutiny," said Beth Kerttula, House minority leader.
Under the terms of the Alaska Gasline Inducement Act, the state has agreed to reimburse TransCanada for up to $500 million in costs.
Hawker said that he understands the idea is for the companies to do more together in the future, but at this point there are no commitments other the gas conditioning plant work.
Commenting to Matt Lauer on the “Today” show, Alaska Gov. Sarah Palin said Hawker supported the Alaska Gas Line Inducement Act. “He still supports it. It’s politics. Matt, coming up here on an election year, I think a lot of the folks are positioning themselves for future runs and things, so they have to say some things like that.”
"Exxon is the driver. They have the largest interest, the deepest pockets," said Fadel Gheit, a senior energy analyst with Oppenheimer & Co. "Exxon is the tie-breaker. If Exxon takes a side, this is the winning side." But, Gheit cautioned, Exxon isn't likely to make a firm commitment to one project over the other unless the company secures a favorable fiscal commitment from the state.

ConocoPhillips says Denali gas pipeline to be in service by 2019

ANCHORAGE - ConocoPhillips and BP Plc plan to bring their proposed natural gas pipeline in Alaska into service by 2019, a ConocoPhillips executive said during the company's analyst meeting on March 11.
The Denali pipeline, estimated to cost $30 billion, is expected to begin accepting bids for gas transportation in 2010, said Ryan Lance, the company's president of exploration and production for Europe, Asia, Africa and the Middle East. The companies had previously said the pipeline could begin transporting gas as soon as 2018.
The 2,000-mile pipeline proposed by BP and ConocoPhillips would bring two billion cubic feet of gas a day, or six to eight percent of total U.S. daily consumption, from Alaska's North Slope to Alberta, Canada. The companies may also build a 1,500-mile pipeline extension from Alberta to Chicago.
Alaska officials are reviewing a competing proposal from TransCanada Corp. backed by Gov. Sarah Palin, who during the 2008 presidential race implied that she had already arranged for the gas pipeline to be built.
Only one pipeline is likely to be built, if any, and it may well be Denali rather than the TransCanada proposal backed by Palin.

Palin says instate gas pipeline for Alaska top legislative priority

ANCHORAGE - Gov. Sarah Palin began the 2009 session of the Alaska Legislature on Jan. 20 faced with a potential state deficit in the billions of dollars.
Palin said the state has saved money and, with oil prices in flux, it's too soon to say what the budget will look like.
Palin said this session should be about cooperation between her and legislators, especially on proposals like an in-state natural gas pipeline. Business people, legislators and state officials have discussed such a "bullet line" in recent months to bring cheaper energy to Fairbanks and Southcentral. Palin didn't give a specific plan, but said it would be her main effort.
"My focus is going to be on energy and making sure that Alaskans have access to their resources. In-state gas is top priority for me," Palin said in an interview.
If oil prices average $40 a barrel between now and the end of the budget year in June, the state will fall $2 billion short in covering the current budget, said legislative finance director David Teal. Should prices remain that low over the following year, legislators said the deficit could rise by an additional $3 billion.
Savings could cover such a shortfall for a while. The state has more than $7 billion in savings accounts, most deposited last year when oil prices soared.
Palin's spending plan for next year is based on her revenue department's forecast that oil will rise to average more than $70 a barrel in the year starting in July. The U.S. government's Energy Information Administration is predicting prices more in the $43-$55 barrel range over the next two years. That is a sore point with some legislators, who say the governor is leaving them to deal with a big mess if the state's forecast does not come true.