Exxon May Increase Alaska-US Pipeline Efforts (XOM, TRP, COP, BP)

Exxon Mobil Corp. (NYSE: XOM) may be getting deeper and deeper in Alaska via a monster pipeline project.  A report from the Houston Chronicle said the oil giant is in discussions with TransCanada Corp. (NYSE: TRP) to assist in building a long pipeline that will transport natural gas from the North Slope of Alaska through Canada to the United States market.  This could have some rather large implications for a project being run by ConocoPhillips (NYSE: COP) and BP plc (NYSE: BP).

If this report is accurate, which is still somewhat of a Chronicle-lead story and may be a few weeks from being formalized or decided, then this pipeline could thwart a competing project by ConocoPhillips and BP.  The price tag is being put at $30 billion and the distance is said to be some 1,700 miles.  Because the distance between as a crow flies, it will be hard to make this pipeline much shorter.

We have been following this possibility for the last 12 months as energy prices were rising sharply and because of the Trans-Alaska Pipeline.  A competing interest does not come without controversy.  As a reminder, there is more than just Alaska here.  There is the Canadian government, and then there is the U.S. Congress that has so far held up many of these large projects.

Getting the details is still preliminary, but based on what we have seen this was not a part of Exxon’s cap-ex plans outlined by the company.  If that is the case, then we’d expect some of the funds that had been earmarked to repurchase shares to be switched over to this project.

Jon C. Ogg
June 11, 2009