Consortium Agrees on Alaska Natural Gas Pipeline Route (XOM, COP, BP, TRP)

Four major oil and gas companies have reached an agreement on the route of an 800-mile natural gas pipeline to transport gas from Alaska’s North Slope to a port on the state’s southern coast. Exxon Mobil Corp. (NYSE: XOM), ConocoPhillips (NYSE: COP), BP plc (NYSE: BP), and pipeline company TransCanada Corp. (NYSE: TRP) will combine what were two competing routes aimed at shipping natural gas primarily to Asian markets.

In March the four companies agreed to begin transporting oil from Point Thomson by 2016 in exchange for lease renewals from the state of Alaska. Some of the leases date back to 1977, but no gas has ever been produced for export. The Point Thomson fields are located east of Prudhoe Bay and are expected to produce about 70,000 barrels a day of condensates for shipment to the coast. The town of Valdez will be the destination for the condensate, but the natural gas may be shipped somewhere else along the coast.

Now that natural gas prices in some Asian countries is about five times higher than the $3 per thousand cubic foot U.S. price, such a project is economically feasible. Cost estimates rise as high as $65 billion and a time schedule runs out at least a decade in the future. The four companies are considering 22 sites as the possible terminus for the natural gas pipeline. A liquefied natural gas (LNG) plant would also be constructed to prepare the gas for shipment by tanker to Asia.

Paul Ausick