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Providing coverage of Alaska and northern Canada's oil and gas industry
June 2009

Vol. 14, No. 25 Week of June 21, 2009

TransCanada-Exxon plan has Thomson line

ExxonMobil to lead integrated Alaska pipeline project team; TransCanada will keep Alaska technical lead through open season

By Kristen Nelson

Petroleum News

While TransCanada will head the management committee for the joint TransCanada-ExxonMobil Alaska pipeline project announced June 11, ExxonMobil will lead the integrated project team.

“During its development and construction, the Joint Project is managed within an integrated project organization, led by ExxonMobil,” the companies said in a work program and budget submitted to the State of Alaska. The development phase includes work through receipt of a certificate from the Federal Energy Regulatory Commission in mid-2014; then the construction phase begins and continues through initial gas in the fall of 2018.

When ExxonMobil’s partnership in the TransCanada project the state licensed under the Alaska Gasline Inducement Act was announced, ownership shares were not made public, but the companies said TransCanada retains majority ownership.

The AGIA license provides up to $500 million in state matching funds for specified work by the licensee and other incentives in exchange for a commitment to meet certain state requirements for the North Slope-to-market gas pipeline project, and to complete work through receipt of a certificate of convenience and necessity from FERC.

While ExxonMobil will lead the integrated project team, TransCanada will have a somewhat broader role in the joint current proposal subphase, which continues through to July 30, 2010, when the open season process ends. In addition to leading the pipeline and compression sub-project in Canada, TransCanada’s role during the current phase “is expanded to include the technical work associated with the pipeline and compression system downstream of the GTP in Alaska,” the companies said.

Point Thomson line included

The plan TransCanada and ExxonMobil submitted to the State of Alaska for their joint work includes a gas treatment plant on the North Slope, a gas pipeline to market in either Alberta or Valdez or both — and a gas transmission line from Point Thomson to the GTP.

Because the line from Point Thomson to the gas treatment plant is not part of AGIA, costs for that portion of the work are not reimbursable by Alaska under AGIA, the companies said.

ExxonMobil is one of the three major gas owners at Prudhoe Bay, but is also the major owner at Point Thomson, and its combined ownership in the two fields makes it the largest owner of known North Slope natural gas reserves.

The joint work plan is not a commitment to build a gas project from Alaska’s North Slope to market, but does commit to work that will be done through an open season. The companies said subsequent work plans will cover the work involved in submitting a certificate of convenience and necessity to FERC and then getting approval from FERC for that certificate.

BP and ConocoPhillips — the other major North Slope gas producers — are also progressing a gas pipeline project, Denali, from the North Slope to North American markets.

Only one project will be built and there is general agreement that it will require collaboration among TransCanada, the pipeline company; the State of Alaska; the three major North Slope gas owners; and U.S. and Canadian governments.

Definition before decision

The current phase of the project — through July 30, 2010, the end of the open season process — is the proposal sub-phase of the development portion of the project.

Benchmarks in the current work include:

• May 5, 2009, commencement of joint work;

• March 31, 2010, capital cost estimate complete;

• March 31, 2010, FERC approval of open season plan; and

• July 30, 2010, open season complete.

Two definition phases will occur before a decision is made to proceed with construction, the companies said in paperwork filed with the state and available on the state’s AGIA Web site at www.gov.state.ak.us/agia/agia_tc-em.php: definition sub-phase one with the primary focus on preparing and filing an application for a certificate of public convenience and necessity with FERC and related regulatory applications in Canada; definition subphase two with primary joint work focus on securing the FERC certificate and the Canadian leave to proceed, securing project financing and preparing for the decision to proceed.

According to project milestones, definition subphase one would end in October 2012 with filing of the FERC application; definition subphase two would end June 2014 with issuance of the FERC certificate in the U.S. and the leave to construct by the Northern Pipeline Agency in Canada.

Pre-construction logistics would begin in May 2016; on-site construction in April 2016; initial gas deliveries in September 2018.

Greenfield v. brownfield

The companies said there will be 90 full-time-equivalent members of the project team staff, including employees, secondees and in-house consultants; the budget for work from May 5 through July 30, 2010, is $141,996,000. There will be field offices for the project in Anchorage and Whitehorse, Yukon.

In discussing the scope of gas treatment plant work the companies said this phase is concept selection and scope definition, with definition leveraging the Alaska Gas Producers Pipeline Team study, a BP-Conoco-Exxon study done early in the decade.

The scope includes determination of a greenfield vs. brownfield development, i.e. the extent to which a GTP could be integrated with the existing Prudhoe Bay Central Compressor Plant and Central Gas Facility. AGPPT studies will be used to develop a greenfield standalone GTP as a base case, the companies said.

The GTP work will also include a review of carbon dioxide disposal requirements and how those could be integrated into existing operations. The companies said the current base case includes CO2 re-injection into Prudhoe Bay reservoirs.

On the pipeline side, a winter field program was to be completed this spring and a summer field program is planned including a geophysical investigation program and a supplemental borehole drilling program.

Alaska legislators have scheduled hearings June 23 to hear from all the pipeline proponents and the administration.






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