BP-Conoco Alaska gas pipe plan seeking shipper

By Yereth Rosen

ANCHORAGE, Alaska, Nov. 13 (Reuters) - A joint venture between BP (BP.L: 株価, 企業情報, レポート) and ConocoPhillips (COP.N: 株価, 企業情報, レポート) seeking to build a massive Alaska natural gas pipeline has started negotiations with a potential shipper that might feed gas into the project, the companies said in a report to the state legislature.

Denali, the BP-Conoco joint venture, plans to hold a formal open season next year to solicit commitments from potential shippers, said the report sent this week from the companies to lawmakers.

"We'll be holding our open season in 2010, but have not committed to a date," David MacDowell, a Denali spokesman, said Friday. "We're focused on conducting our own open season and creating commercial opportunities that we hope will be attractive to our customers."

The venture already has spent $120 million to date on its proposal for the pipeline, which aims to send natural gas from Alaska to the lower 48 U.S. states.

It is unclear whether the Denali season will come before, after or during the 90-day summer open season planned by TransCanada Corp (TRP.N: 株価, 企業情報, レポート), which is pursuing a competing natural-gas pipeline proposal.

To be considered successful, an open season must result in solid pledges from shippers leading to project financing and sanction, according to MacDowell.

"A successful open season is one where shippers make the multibillion dollar financial commitments to the project so that Denali can move forward toward FERC certification, financing, and construction," he said.

Both the Denali project and the TransCanada project, in which Exxon Mobil Corp. (XOM.N: 株価, 企業情報, レポート) has joined as a partner, propose a large-diameter pipeline running about 1,700 miles from Prudhoe Bay to an existing pipeline hub in Alberta.

BP, ConocoPhillips and Exxon are the major North Slope oil producers and holders of leases to most of the known North Slope natural gas reserves.

The competing projects each propose to ship about 4 billion cubic feet a day from the North Slope, starting as early as 2018. State consultants have estimated that such a North Slope pipeline would cost over $30 billion. Both project sponsors are refining their cost estimates.

TransCanada's proposal has the backing of the state in the form of a license issued under the Alaska Gasline Inducement Act, or AGIA. The Denali project is being pursued outside of AGIA.

Under the terms of AGIA - a law promoted by then-Gov. Sarah Palin as a negotiations-free way to spur competition among potential pipeline builders - TransCanada is entitled to a state subsidy of up to $500 million. In turn, TransCanada must abide by several state requirements, including a mandate for an initial 90-day open season to close by July 31. (Reporting by Yereth Rosen; Editing by David Gregorio)