BP has decided to sign on with ConocoPhillips’ existing plan to build a long-awaited natural gas pipeline off the North Slope of Alaska.
Exisiting pipes in Prudhoe Bay, Alaska (HO/AFP/Getty Images).
The move isn’t exactly a surprise — BP is the largest producer in Alaska, so any plan to get natural gas to the lower 48 would eventually involve them. Exxon, the other major producer on the slope, has also said it expects it would own a stake in any pipeline to move gas from the Slope (although it tends to move a little more slowly on these things, i.e. it was the last to join the last gas pipeline deal discussions).
Rather the annoucement ups the ante in the face-off between the oil majors and Alaska Gov. Sarah Palin. After the legislature threw out a 2006 pipeline agreement between the majors and the former governor, Frank Murkowski, saying it was too favorable to the companies, Palin started a new process to solicit project bids. TransCanada put forth the only bid that was accepted, but Palin hasn’t formally asked Alaskan lawmakers to bless that bid.
Conoco doesn’t really need the state’s blessing to build a pipeline — the Federal Energy Regulatory Commission is really the body that oversees such projects (here’s the web site for the federal agency trying to get this thing to happen). And the state doesn’t technically need the majors stamp of approval to bid out a project of its own, either. But since the producers own the gas and the state has the right to tax any gas production, the parties will have to settle their differences eventually.
The Conoco/BP project, now called Denali — The Alaska Gas Pipeline, plans to hold an open season by the end of 2010. The companeis are committing $600 million to that goal, although the final project price tag is expected to run in the $30 billion t0 $40 billion range.