* Planned pipeline would be in service 2020
* Cost similar to competing TransCanada/Exxon plan
(Corrects cubic feet to British thermal units in paragraph
(Adds Denali president, Alaska governor quotes)
By Yereth Rosen
ANCHORAGE, Alaska, April 7 Denali, the company
created by oil giants BP Plc (BP.L) and ConocoPhillips (COP.N)
to build and operate a natural gas pipeline from Alaska's North
Slope to North American markets, estimates the project will
cost $35 billion, according to documents filed on Wednesday
with federal regulators.
The Denali pipeline, which would run 730 miles (1,175 km)
in Alaska and 1,020 miles in Canada, will deliver about 4.5
billion cubic feet a day of natural gas to North American
markets, according to the company's formal plan to solicit
customers, filed with the Federal Energy Regulatory
The pipeline would be in service in 2020.
Denali's 90-day open season -- the period in which
potential shippers are invited to commit natural gas to the
project -- would start on July 6, according to the application
filed with FERC.
The BP-ConocoPhillips company, created in 2008, said it
already has invested more than $140 million in the project.
The Denali venture is competing with another gas pipeline
project sponsored by TransCanada Corp (TRP.TO) and Exxon Mobil
The cost estimate for that 1,700-mile project is $32
billion to $41 billion, according to the TransCanada-Exxon
Mobil open-season plan. Those companies have received FERC
permission to start a 90-day open season on April 30.
Denali President Bud Fackrell said the company has "a
really high-quality design and execution plan" and believes its
$35 billion estimate is well supported.
"We have to give confidence to the shippers that we know
what this project is going to cost. We feel very good about
that," Fackrell said in a telephone news conference.
But he warned that Alaska's pipeline project -- promoted by
state officials for decades -- has to compete with other
sources of natural gas that are flooding into the North
American market, including shale gas and potential new sources
of liquefied natural gas.
Denali's open-season plan assumes a shipping charge of
$2.67, in 2009 dollars, for every million British thermal units
of natural gas sent from the intake station at Prudhoe Bay to
Alberta, Fackrell said at the news conference.
Alaska's North Slope holds known natural gas reserves of
about 35 trillion cubic feet and is believed to hold much more
gas that has yet to be discovered. However, almost all of that
gas has been stranded on the North Slope for economic reasons,
even though the nation's biggest oil fields have been producing
there and shipping crude down the existing trans-Alaska oil
pipeline for three decades.
High costs and uncertain markets have precluded
construction of a North Slope natural gas pipeline, a proposal
that has been promoted by Alaska officials since before
construction of the oil pipeline.
BP, ConocoPhillips and Exxon Mobil are the major North
Slope oil producers and hold leases to nearly all the known
reserves of North Slope natural gas.
TransCanada is not a North Slope leaseholder but holds a
license from the state entitling it to up to $500 million in
subsidies, as well as preferential fiscal and regulatory
Fackrell said Denali offers different advantages to
potential shippers. Under the Denali proposal, initial shippers
would not have to subsidize any future expansion of the
pipeline capacity. Under the "rolled-in rates" terms of the
Alaska Gasline Inducement Act, initial shippers must help
finance future capacity expansion within the Alaska portion of
Other companies are invited to participate, but not under
the mandates of the Alaska Gasline Inducement Act, Fackrell
said. Those terms, to which license-holder TransCanada is
committed, are "prohibitive for the two projects to join
together at this point," he said.
Alaska Gov. Sean Parnell on Wednesday defended the AGIA
terms and said, despite Fackrell's comments, a merger of the
two competing gas pipeline plans is possible.
"They're negotiating, it's posturing," Parnell said of
(Editing by Bill Rigby, Walter Bagley, Lisa Shumaker, and Bob