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March 08, 2002 --- Vol. 8, No. 25March 2002

BP says study will confirm view that Alaska pipeline is uneconomic

Gas is unlikely to flow from the North Slope this decade, but producers are far from giving up on the project, John Carruthers, BP's program manager for Alaska gas development, told a Calgary conference March 7.

He said final results of the feasibility study by BP, ExxonMobil Corp. and Phillips Petroleum Co. due to be made public shortly will reaffirm earlier conclusions that a project is uneconomic with gas prices in the range of $2.50 per thousand cubic feet.

"BP has confirmed that at this point we do not have a commercially viable project," he told the Canadian Institute's Arctic Gas Symposium.

Carruthers said the results of the study "will be consistent with what we have said in the past."

To make development economic, he said "we will be looking to address the bigger risk that we saw in terms of the regulatory processes and we will look to reduce costs in terms of technological advancements."

Carruthers said attention will not turn to governments, which have a vital role to play in lowering costs and risks.

He said the U.S. and Canadian governments will be lobbied to introduce simpler and more predictable regulatory approval processes, while the Alaska government will be asked to provide greater certainty on taxes and royalties.

In the meantime, the team that has worked on the feasibility study is being demobilized, including 100 staff from sponsor companies who will be reassigned to other work and 800 contract workers.

"It doesn't mean we are giving up," said Carruthers. "BP remains committed to the prospect of Alaska gas development. We will be working very hard to reduce cost, reduce risk to make it economically viable."

Otherwise he expressed disappointment that the U.S. Senate made moves on March 6 to require a pipeline.html'>gas pipeline from the North Slope to follow an overland route along the Alaska Highway, rejecting a northern route across the Beaufort Sea to the Mackenzie Delta.

Carruthers said "anything that limits this project is not positive."

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