BP, ConocoPhillips Abandon Alaska Gas Pipeline Project

Annie Feidt, APRN – Anchorage

BP and Conoco Phillips are abandoning their joint effort to build a gas pipeline from Alaska’s North Slope to the Lower 48. Officials with the Denali project announced this morning they did not get the customer commitments needed to continue the pipeline project. Scott Jepsen is Vice President of business services for Denali. He says since Denali began work in 2008, the shale gas boom in the Lower 48 has taken off.

“The Lower 48 right now has a tremendous amount of gas available, probably excess gas and consequently prices have really declined since the Denali project began,” Jepsen said. “When we began prices were in the $8 range and now they’re in the mid $3.50’s to $4.50 range.”

Jepsen says no one knows how long shale gas will be produced at such high volumes. And he says that’s creating a lot of uncertainty about the future of supply and demand for natural gas in North America.

“That really I think has made it a difficult environment for us to try and go out and get 100 billion dollars plus in commitments that we need to build this project and to get the multi decade commitments that we require,” Jepsen said.

Denali spent $165 million on the three year effort. Jepsen says at its peak, several hundred employees worked on the project.

He says the company will withdraw its pre-file application with the Federal Energy Regulatory Commission and close out operations in the next few months.

In a statement, Federal Gas Line Coordinator Larry Persily says that although U.S. natural gas markets are well supplied in the near-term, that could change as the nation’s utilities increasingly turn to cleaner-burning natural gas as the fuel of choice. He says there could be a place in the market for North Slope gas in the 2020s and beyond.