BP, ConocoPhillips scrap $35-bn Alaska gas pipeline JV
18 May 2011
In the backdrop of energy major BP's proposed alliance with Rosneft having fallen through, BP and ConocoPhillips have decided to scrap their planned $35-billion joint venture natural gas pipeline project in Alaska because of poor customer demand and bad project economics.
Through the joint venture project, named Denali, the two oil giants had proposed building a 1,700-mile (2,737-km) pipeline to transport about 4.5 billion cubic feet per day of gas from Alaska's oil and gas-rich North Slope to Alberta, in Canada.
The project could not secure financial commitments from gas producers on Alaska's North Slope despite 18 months of negotiations. Denali also blamed low gas prices and strong domestic supplies of natural gas produced from shale rock in Texas and other parts of the US for the project's cancellation.
Besides BP and ConocoPhillips, Exxon Mobil Corporation is also a major producer in the area.
A similar joint venture project being implemented by Exxon Mobil Corp and TransCanada Corp is, however, progressing well. That project, estimated to cost up to $41 billion, however, has a licence and financial backing from the Alaska government.
The BP- ConocoPhillips joint venture does not have state backing and hence is more vulnerable to natural gas price fluctuations.