Conoco stands by gas pipeline development efforts

Elizabeth Bluemink

Conoco Phillips said Tuesday it hasn't backed away from its efforts with BP to develop a North Slope gas pipeline.

The company clarified its position on its $35 billion gas line project after a London-based Financial Times article quoted the company's chief executive Jim Mulva saying the company will "reassess" the project due to a glut of Lower 48 natural gas.

A Conoco spokesman in Houston said Tuesday that the company hasn't started a new review of the project. It's just continuing with the work it was already doing, he said.

"Clearly, shale gas (in the Lower 48) has changed the dynamics of natural gas in North America," spokesman John McLemore said.

Conoco and BP created a pipeline company called Denali that is competing with a state-backed pipeline project created by TransCanada Corp. and Exxon Mobil to build and operate the proposed North Slope pipeline.

Both pipeline ventures are seeking commitments from North Slope leaseholders -- including Conoco, BP and Exxon -- to ship large volumes of gas through a gas line. TransCanada held its open season to get shipping commitments this summer. Denali's open season ends Monday. The companies involved agree that ultimately, only one pipeline will be built.

After next Monday, McLemore said, Conoco Phillips will consider the market response, long-term gas prices, supply forecast and taxation issues that its pipeline project faces.

Mulva told the Financial Times that his company has shut down some production in the Lower 48 and Canada because gas prices had dropped too low.

However, Mulva struck a more optimistic note during a speech he gave on Monday in Houston. He said natural gas will be "very attractive" in the future in comparison with other energy sources, and he said gas prices are expected to increase and become less volatile.

Mulva argued for a future with more vehicles, manufacturing plants and electric-power utilities that run on natural gas.

"There is plenty of gas available to begin this changeover. The near-term incremental demand would only equal two years of projected growth in U.S. shale production. Or it would equal the volume of our proposed Alaska North Slope gas pipeline," according to a written transcript of his speech.

Federal gas pipeline coordinator Larry Persily said Tuesday he didn't see anything unusual in Mulva's remarks.

Persily passed along a letter from President Barack Obama dated Monday in which the president wrote that he shared "anticipation that a North Slope natural gas pipeline could be finally on its way south to serve North American markets."

Obama wrote that the proposed pipeline could bring "more than $10 billion worth of domestic natural gas a year to the Lower 48 states at projected future prices."

Obama's letter was addressed to participants in this week's Alaska Oil & Gas Congress, a four-day meeting that began Monday in downtown Anchorage.

Find Elizabeth Bluemink online at or call 257-4317.