Denali Project announces open season for gas line

April 08, 2010

The Denali Pipeline Project announced its plans for an open season Wednesday. (File/KTUU-DT)

by Christine Kim
Wednesday, April 7, 2010

ANCHORAGE, Alaska -- The Denali natural gas pipeline project announced its plans for an open season Wednesday. The project's president, Bud Fackrell, says it has filed paperwork with federal regulators.

The open season period is when the project tries to get gas producers to commit their gas to the pipeline, and is a big step when it comes to getting financing.

The Denali Project, backed by BP and ConocoPhillips, is starting out with some concerns, but says its cost estimates will boost shipper confidence.

The project's main line will cross Alaska and go into Canada, delivering 4.5 billion cubic feet of gas per day.

"I think the important point right now is: No one is waiting for Alaska gas, and the Alaska gas project first of all needs to be economic and it needs to compete with other projects. We will find out in the open season whether shippers believe this project will compete or not," Fackrell said.

The project would cost $35 billion dollars and would build the world's largest gas treatment plant.

The rates would start at 50 cents per 1,000 cubic feet of natural gas for in-state delivery, and an additional 90 cents for gas treatment plant services.

"One of our main objectives was to provide a high-quality cost estimate to provide confidence for shippers. Remove one of the risks of the project which was the uncertainty around the cost," Fackrell said.

The project is in competition with the state's Alaska Gasline Inducement Act-approved project with TransCanada and ExxonMobil to build a natural gas pipeline to the Lower 48.

To attract customers, Denali will offer unbundled gas treatment plant services.

There will be six delivery points in Alaska, at least four in Canada, and there can be more based on shipper input.

"Two-and-a-half years ago everybody was high-centered; there was no progress on a gas line. Now we have two projects on this particular path that appear to be moving together," Gov. Sean Parnell said.

Federal regulators gave TransCanada the green light with its plan last week.

The company says the choice, however, is in the customers' hands.

"We're offering two discrete alternatives. We're offering customers to provide service either to Valdez, if they prefer the LNG alternative, or they can go to Alberta if they prefer that route to get their gas to the Lower 48," TransCanada's vice president of Alaska Development, Tony Palmer, said.

Denali said it's concerned that it will get heavily-conditioned bids.

Before the open season, Denali's plan will need approval by federal regulators.

If federal regulators approve the plan, Denali says the open season will start in July and continue for at least 90 days.

Contact Christine Kim at ckim@ktuu.com

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