Chinese, Others Interested in Alaska Gas Project

WASHINGTON Sep 6, 2007 (Dow Jones Newswires)

A Chinese oil company is one of several foreign companies expressing an interest in building a major Alaska natural gas transportation project, a U.S. federal government official said Wednesday.

The multi-billion-dollar Alaska natural gas pipeline project is intended to transport trillions of cubic feet of gas from the Alaskan North Slope to the lower 48 states, but some of the expected license application proposals could allow gas to be exported to Asia, the official said.

Drue Pearce, recently appointed U.S. Federal Coordinator for the Alaska Natural Gas Transportation Projects, said Spain's Repsol YPF SA (REP), BG Group PLC (BRG) and a Chinese company had joined TransCanada Corp. (TRP), the Alaskan Gasline Port Authority and Mid-America Pipeline Co. in expressing an interest in submitting an application to the Alaskan state government. She declined to identify the Chinese company.

She said several of the proposals plan for a pipeline from the North Slope to a gassification terminal in Valdez, Alaska. From there, gas could be transported to any regassification terminal in the world, but the primary focus would be on the Pacific rim. Approval to build LNG terminals on the West Coast of the U.S. has faced tough opposition.

As oil and gas supplies in the lower 48 states wane and the country increasingly seeks to wean itself form its dependence on imports from politically unstable areas of the world, natural gas from northern Alaska and Canada is being offered as a "clean energy" alternative. Gas reserves - the North Slope is estimated to hold around 35 trillion cubic meters of discovered resources and 170trillion cubic feet of undiscovered natural gas - have been stranded in the region because of the long distance to the market and the cost of transportation.

The Alaska pipeline project, originally started in the early 1970s, has faced a mountain of regulatory, regional, environmental and bureaucratic hurdles. Approval for the project would require filing permits with several dozen federal and state agencies, not to mention obtaining cross-border agreements with Canada.

Earlier this year, Alaska Gov. Sarah Palin pulled a proposal approved by her predecessor that would have piped gas along the Trans-Alaska Pipeline route to Fairbanks and then to the Alaska-Canada Highway on to Midwestern markets.

In February 2006, then-Gov. Frank Murkowski, BP PLC (BP), Exxon Mobil Corp. (XOM) and ConocoPhillips (COP) had agreed on a $25 billion gas pipeline project that would have delivered 4.5 billion cubic feet of natural gas a day - roughly 7% of U.S. demand - and would take about a decade to complete.

Instead, Palin proposed an incentive program called the Alaska Gasline Inducement Act, or AGIA, that offers around $500 million to help pay for regulatory filing costs, if the companies agreed to a set of principles outlined by her government.

Bids are due by Nov. 30. Pearce said the state hopes to select the most competitive bid by February. The legislature would still need to approve the winning application before a company could start the filing process with the Federal Energy Regulatory Commission, which could take several years.

Producers, such as Royal Dutch Shell PLC (RDSA), Exxon and ConocoPhillips, don't support the AGIA program, and Pearce said she had heard that they wouldn't submit an application for a license.

The federal coordinator said that the "All Alaska" line - which would ship volumes in the form of liquefied natural gas - would transport only around 1 billion cubic feet a day.

In 2004, Congress passed the Alaska Natural Gas Pipeline Act to spur development of the project. Pearce said that although Congress intended the gas for U.S. markets to ease expected energy shortfalls, nothing in the act would prohibit the natural gas from being exported.

The project isn't expected to be online until 2018, at the earliest, though some oil company executives believe the start-up could be delayed into the early 2020s.

Copyright (c) 2007 Dow Jones & Company, Inc.


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