ConocoPhillips Goes to Work on Gas Pipeline Project

This week ConocoPhillips announceD they would start field work on the Alaska Gas Pipeline. This announcement came on the heels of a meeting with Governor Sarah Palin on Sunday night.

The Governor released a statement saying that ConocoPhillips is partially right, but put off the idea of further pipeline discussions with ConocoPhillips. Palin believes that the project can be scoped piecemeal - first the gas line via the AGIA process then fill the line with gas.

Some analyst think the Alaska Gas Pipeline and the Mackenzie pipeline in the Northwest Territories have waited too long and will lose out to competition from overseas LNG.

That may be true, but ConocoPhillips needs the pipeline, in part to offset crude oil production cost at their $15 Billion oilsands project in Canada. For ConocoPhillips the Alaska Gas Pipeline is part of a bigger picture.

Natural gas is required to upgrade the oil sand bitumen. Canadian natural gas production is in decline so Alaskan natural gas is one key to the future development of Canadian oil sands.

ConocoPhillips needs heavy sour Canadian crudes to feed refineries designed to process Venezuelan crude. This report by the Energy Information Agency (EIA) explains the dependence of ConocoPhillips on Venezuelan imports.

Another report by the Government Accountability Office (GAO) assesses the impact of future crude oil supply disruptions that may be caused by Venezuela.