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Vol. 15, No. 41 Week of October 10, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

Denali bids close

BP-Conoco project open season closes with ‘bids for significant capacity’

Kristen Nelson

Petroleum News

Once again the news was positive for a decades’ old dream to see Alaska North Slope natural gas go to market. The BP-ConocoPhillips Denali project said Oct. 4 after its open season closed that it received bids for what it called “significant capacity.”

The language parallels the statement of the competing TransCanada-ExxonMobil Alaska Pipeline Project, which said after its open season closed July 30 that it received “multiple bids … for significant volumes.”

The Oct. 4 statement from Denali President Bud Fackrell was positive:

“After two years of work, more than 700,000 man hours and more than $150 million of private investment, I can report that Denali has received bids for significant capacity from potential shippers.”

But it’s not a done deal.

“As expected, the bids include conditions, some of which are outside of Denali’s control. We will carefully evaluate these bids and their conditions and continue confidential negotiations with potential shippers in an effort to reach binding agreements,” he said.

Fackrell said Denali’s next steps will be determined by commitments its customers are willing to make.

“Based on what potential shippers have publicly stated in the past, we expect their evaluations to focus on the competitiveness of Alaska North Slope gas, including factors such as gas markets, growth in North American shale gas supplies, the Alaska fiscal framework and the status of Point Thomson leases,” he said.

Feb. 1 for precedent agreements

The Denali project includes a gas treatment plant on the North Slope, transmission lines from the Prudhoe Bay and Point Thomson fields to the GTP, an Alaska mainline from the North Slope to the Alaska-Yukon border and a Canada mainline from the Alaska-Yukon border to Alberta.

Delivery points are included along the line to help meet local natural gas demand in Alaska and Canada, the company said.

Denali’s cost estimate for the GTP and the pipelines is some $35 billion.

Separate open seasons were held for the Alaska and Canada portions of the project.

The Federal Energy Regulatory Commission said in its latest biannual report to Congress on progress in licensing and constructing an Alaska gas pipeline that Feb. 1 is the date for execution of precedent agreements for Denali. The date for the TransCanada-ExxonMobil Alaska Pipeline Project is Dec. 31.

As FERC explains it, shippers awarded capacity as a result of the open season must sign binding precedent agreements before the close of the open season and must perform obligations under the precedent agreements by Feb. 1. FERC said for all signed precedent agreements for which shippers have satisfied their obligations under the precedent agreement, Denali intends to execute the precedent agreements within 30 days.

Once Denali has executed a precedent agreement it has 10 days to announce “the name, term, and capacity awarded each shipper.”

By that timeline, the earliest names, terms and capacity would be made public from the Denali open season would be around the middle of March.



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