BP, Conoco join to build Alaskan natural-gas line

JUNEAU, Alaska — Two of the world's largest oil companies unveiled plans Tuesday to jointly develop a multibillion-dollar pipeline to move natural gas from Alaska's energy-rich North Slope to U.S. markets.

Britain's BP and ConocoPhillips, based in Houston, said they plan to spend $600 million in the first phase of the project over the next three years, beginning this summer. The project's cost estimates exceed $30 billion.

The announcement represents the first visible steps toward pipeline construction on a project that hit a dead end during a legislative stalemate two years ago.

The pipeline would eventually move about 4 billion cubic feet of natural gas per day to markets, about 6 percent to 8 percent of daily U.S. consumption, the companies said.

No timeline was announced for construction and completion, but the companies have said it would be at least 10 years before gas begins to flow.

The plan, dubbed Denali-The Alaska Gas Pipeline, is to deliver natural gas via a 2,000-mile pipeline from the energy-rich North Slope in Alaska to Alberta, Canada. Gas can then go into an existing pipeline system, or if necessary, BP and ConocoPhillips said it could build an additional 1,500-mile pipeline to U.S. markets.

Two years ago, former Gov. Frank Murkowski settled in principle with BP, Exxon Mobil and ConocoPhillips on fiscal terms — taxes and royalties — for producing the North Slope gas.

The Legislature would not vote on it because lawmakers believed it was too much of a giveaway to the energy industry. That prompted then newly elected Gov. Sarah Palin to chart another course, while refusing to continue negotiations with the oil companies.

Palin introduced the Alaska Gasline Inducement Act — or AGIA — early in 2007 as a means to stimulate competition among oil companies as well as the independent pipeline companies.

Palin said Tuesday's announcement by BP and ConocoPhillips illustrates how AGIA stimulated competition.

ConocoPhillips first submitted the current plan on its own to Palin's gas line team in November, when applications for a license were due. But ConocoPhillips' proposal was outside the bid requirements of the state's new law and was rejected by Palin in January.

ConocoPhillips eventually decided to move forward on its own and began talks with BP to become a partner. Talks on taxes and other terms can wait, the companies and Palin said.

"It's just too important a project for it not to move forward," said Angus Walker, a senior vice president with BP. "So what we do is we keep the project on track, which everybody wants, and we deal with those issues parallel to the project without slowing the project."