October 07, 2005 --- Vol. 11, No. 79October 2005

Governor’s asks for quick response; producers offer no date

Alaska Gov. Frank Murkowski delivered a contract term sheet to the producers in September, and yesterday the governor announced he had delivered an Alaska gas pipeline fiscal contract to BP, ConocoPhillips and ExxonMobil.

“I anticipate receiving an affirmative response from the producers within the next few days,” the governor said.

None of the three companies could confirm how long a response would take.

“We are making good progress towards a fiscal contract with the state,” ConocoPhillips Alaska spokeswoman Dawn Patience said Oct. 6. “ConocoPhillips supports the governor’s efforts to complete this process in a timely manner.”

BP Exploration (Alaska) spokesman Daren Beaudo said BP is “looking forward to reviewing the state’s proposal,” and said he couldn’t provide any details because the negotiations are confidential.

“We are working extremely hard toward an agreement on a clear and durable fiscal contract that will enable the project to move forward,” he said.

BP looks “forward to the day when we can share information about a deal,” and is “striving to meet the governor’s desire to have a deal in completed for public and legislative review as soon as possible,” Beaudo said.

Exxon Mobil Corp. spokeswoman Susan Reeves said Oct. 7 that “ExxonMobil, in conjunction with BP and ConocoPhillips, continues to work with the State of Alaska to develop a fiscal contract for a project that would transport Alaska North Slope natural gas via pipeline to markets in Canada and the U.S.”

Reeves said ExxonMobil “will evaluate the State of Alaska’s fiscal contract and will respond when our assessment is complete.”

Mackenzie could take back seat to Alaska: Imperial CEO

The Mackenzie Gas Project faces taking a back seat to Alaska’s Arctic gas plans for “a long period of time” unless there is a speedy resolution of access and benefits agreements with aboriginals and a negotiated fiscal package with the Canadian government, Imperial Oil Chief Executive Officer Tim Hearn said Oct. 6.

“Under current conditions, we don’t have an economic project,” he said after speaking to the Calgary Chamber of Commerce.

Without getting into the details of the government talks, he said Imperial is “looking at cash flow timing things and how we may construct the framework in such a way that it will make it economic.”

Hearn would not comment on claims by the Sierra Club of Canada that federal sources had put a figure of C$2 billion on the Mackenzie partnership’s demands.

Imperial has promised Canada’s National Energy Board it will decide in November whether it is ready to enter public hearings, which would be expected to start in early 2006.

“We’d like to go to hearings, but we’re not there yet,” he said. “We really need to come to some conclusions that make sense for everybody.”

Hearn indicated that the Mackenzie proponents want to ensure cost recovery of the C$7 billion capital investment in the project.

“We’re not asking for handouts and we’re not asking for giveaways,” he said, dismissing some speculation that royalty breaks have been requested.

He characterized negotiations as being at a “sensitive and critical stage.”

“If this thing drags out and drags out, I believe Alaska will get built,” draining available construction labor and materials and impacting North American gas prices.

Hearn would not comment on the gas price Imperial is basing its plans on, but guaranteed that if LNG imports meet projections gas will not approach recent levels of US$14 per thousand cubic feet.

Calgary-based investment banker Tristone Capital said the Mackenzie project could recover its costs and generate a 10 percent return at gas prices of US$3.10 per thousand cubic feet.

Partners in Mackenzie Gas Project are Imperial Oil (69.9 percent owned by ExxonMobil), Shell Canada, ConocoPhillips Canada and ExxonMobil.

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