June 2009 Vol. 236 No. 6

Web Exclusive

ExxonMobil and TransCanada to join forces on Alaska Pipeline

ExxonMobil and TransCanada have announced that they will be cooperating on the construction of the long-awaited Alaska Pipeline project. ExxonMobil will be taking an unspecified stake in the construction of the pipeline, while TransCanada retains the majority interest and all AGIA obligations.

ExxonMobil’s representative Marty Massey, on a press conferece call Thursday afternoon, stressed that this does not bind ExxonMobil into any agreements as a pipeline customer, and that Exxon believes that joining TransCanada in the state-sponsored AGIA process presents the best option to achieve a successful pipeline project. He emphasized ExxonMobil’s and TransCanada’s interest in involving all major North Shore producers, specifically ConocoPhillips and BP.

TransCanada VP of Alaska Development Tony Palmer reiterated that TransCanada wants the “support” of producers, either through the pledge of their gas during the open season through July 2010, or through an equity investment similar to ExxonMobil’s.

Hal Kvisle, TransCanada president and chief executive officer, said, “TransCanada envisions that our combined activities with ExxonMobil, along with the support of the State of Alaska, the U.S. and Canadian governments, and other interested parties, will result in the timely completion of the project. Today’s announcement is an important step toward that goal.”

TransCanada Alaska Company, LLC and subsidiaries of Foothills Pipe Lines Ltd. will remain the Alaska Gasline Inducement Act (AGIA) licensees and TransCanada will continue as the primary point of contact with the State of Alaska and the general public for this project. The AGIA contract obligations of TransCanada to the State remain unaffected.

In November 2007, TransCanada Alaska and Foothills Pipe Lines Ltd. jointly submitted an application under AGIA to build a 4.5 billion cubic feet per day 48-inch diameter natural gas pipeline running approximately 1,700 miles from a new natural gas treatment plant at Prudhoe Bay on Alaska’s North Slope to Alberta, Canada with an LNG option to deliver gas supplies to a liquefaction facility at Valdez.

After approval in December 2008, TransCanada has moved forward with project development, which includes engineering, environmental reviews, Alaska Native and Canadian Aboriginal engagement, and commercial work to conclude an initial binding open season by July 2010.

These plans remain largely unchanged in the face of the new agreement, with the exception of the budget for the project. TransCanada initially estimated a cost of $83 million US to achieve the July 2010 goals. That number has now been raised to an expected $150 million US, with costs to be shared between ExxonMobil and TransCanada. ExxonMobil will be taking the lead in the gas treatment plant construction aspect of the project, while TransCanada will head the pipeline construction. Both companies will be involved in both plant and pipeline construction.

Federal Coordinator Drue Pearce is “delighted” with the announcement of the deal. “Until today, only two of the three major North Slope natural gas producers, ConocoPhillips and BP through their joint venture called Denali, have been active participants in making this long awaited project happen,” said Federal Coordinator Pearce. “TransCanada’s efforts so far have been considerable. ExxonMobil’s active engagement as a full participant is a major development.”

Pearce is in Ottawa meeting with senior Canadian government officials about this major North American natural gas pipeline system and the processing of the two competing projects. Neither ExxonMobil nor TransCanada was willing to comment on the effect of the agreement on the Denali project, or whether Alaska could expect to see one eventual pipeline or two.

The planned pipeline will cross 1,715 miles of Alaska, the Yukon, British Columbia and Alberta. It is expected to be in production in 2018. For more information on the Alaska Pipeline Project, see previous P&GJ coverage here or visit: www.transcanada.com/company/alaska_pipeline_project.html.

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