BP says natural gas pipeline financially out of reach

Posted: Sunday, February 17, 2002

ANCHORAGE (AP) -- BP's chief executive said the estimated $15 billion to $20 billion pricetag on an Alaska natural gas pipeline puts it out of reach financially.

The pipeline ''is not a very good project at all'' because of current prices and competing energy supplies, chief executive John Browne said Thursday to analysts in New York.

The pipeline dream, which has been around for 25 years, was revived as gas prices rose to $10 per million BTU 14 months ago. Prices have since fallen and on Friday were $2.21.

Browne said government assistance, such as tax credits, could make the project more attractive. A couple proposals independent of BP are in the works to offer state or federal help for a pipeline development.

Gov. Tony Knowles this week introduced a bill that would authorize the state-owned Alaska Railroad Corp. to issue up to $17 billion in tax-exempt bonds for companies that build and run a pipeline. And Phillips Alaska Inc. is floating an idea in Washington, D.C., that would protect the company from low gas prices by establishing a price floor of $1.25 per million BTU after subtracting from the market price the cost of shipping gas through a pipeline.

The company said it remains interested in the project.

''We do believe the gas line is an opportunity that is real, and we are pursuing it,'' said Ronnie Chappell, spokesman at BP Exploration (Alaska) Inc.

London-based BP is the parent of BP Alaska, the Anchorage company that operates North Slope oil and gas fields.

It is one of three gas producers looking at whether to build a massive gas treatment plant on the Slope and a pipeline stretching more than 3,500 miles from Prudhoe Bay to the Midwest.

BP, Phillips and Exxon Mobil -- owners of most of the Slope's proven gas reserves of 35 trillion cubic feet -- have finished a $125 million study that looks at what it would cost to thread the line along the Alaska Highway or run it under the Beaufort Sea and across the Canadian Arctic.

While final results haven't been announced, preliminary analysis questioned whether either route would return enough profit given the huge project risks.

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