Tuesday, May 17, 2011

BP, ConocoPhillips OUT

The Denali Pipeline is discontinued for lack of customer interest. We can't says this is a real shocker. From day one we realized that two mainline projects was one too many.

Denali News release (LINK). Quote"

Denali – The Alaska Gas Pipeline announced today that its open season efforts have not resulted in the customer commitments necessary to continue work on its Alaska North Slope gas pipeline project, which has an overall estimated capital cost of $35 billion (2009 dollars). Denali will withdraw its Federal Energy Regulatory Commission pre-file application and, over the next few months, close out its operations.

“Denali is ending its efforts because of a lack of customer support,” said Bud Fackrell, Denali President.“Denali is a market-driven company. As such, we cannot spend the billions of dollars necessary to advancethe project unless we have binding agreements with shippers. Although we have been in discussions with potential shippers for nearly a year and half, we have been unable to secure the financial commitmentsnecessary to advance the project.”

Bloomberg article (LINK) Quote:

Larry Persily, the U.S. government’s federal coordinator for Alaska gas transportation projects, said in a statement that he hopes BP and ConocoPhillips can someday work with Exxon and TransCanada on a pipeline project.

“There could be a place in the market for North Slope gas in the 2020s and beyond, and the gas line is too important to Alaska’s economy not to keep trying,” Persily said.

The real question now is whether or not ConocoPhillips and BP will become customers of the last project standing - the Alaska Pipeline Project.

The Globe and Mail sees a possible win for the Mackenzie pipeline if the APP also stumbles (LINK).


Anonymous said...

AGIA: is it the alaska pipeline project or the denali project?

Originally, which did you think was more feasible?

AK Engineer said...

AGIA = TRANSCANADA + EXXONMOBIL, they call themselves "APP" for Alaska Pipeline Project.

Denali = ConocoPhillips + BP

I've always assumed Exxon would be on the winning team, but I would have bet on some sort of merger of the projects rather than Denali simply closing up shop. Keep in mind one of the major gas shippers is Exxon, so it's no surprise that Denali could not cut a deal that competed with Exxon.