Exxon Joins TransCanada Pipeline, Worries Abound For MacKenzie Gas Project
ExxonMobil's reversal from foe to friend of an Alaskan natural gas pipeline proposed by TransCanada has given the state-sponsored project some much-need momentum. And while many are cheering Exxon's announcement, some folks are worried it will derail another pipeline project in northern Canada. Not to mention a rival Alaska gas project from BP and ConocoPhliips.
Exxon has been viewed as a crucial player for the success of the TransCanada pipeline. So Exxon's decision to help finance and build the $26 billion project was met with a sigh of relief and ethusiasm from government officials including Gov. Sarah Palin.
The 1,700-mile pipeline would carry natural gas from Alaska's North Slope, where Exxon holds the largest natural gas reserves. Natural gas from the Point Thomson field, where Alaska state officials recently scrapped efforts to evict Exxon and partners BP and Conoco for decades of inaction, is expected to begin production in 2014, according to a Bloomberg article.
Exxon's decision to join TransCanada poses a problem for two separate pipeline projects.
One is the rival Alaska gas project proposed by BP and Conoco. BP and Conoco decided to build its own pipeline after TransCanada won an exclusive state license under the Alaska Gasline Inducement Act, legislation backed by Palin. The companies said their project, dubbed Denali, will move forward, but added they were open to alternative plans.
The other pipeline considered at risk is the Mackenzie Gas Project in northern Canada. TransCanada and Exxon are both financially involved in the project. TransCanada invested $500 million in the Aboriginal Pipeline Group, which owns a third of the Mackenzie pipeline. Exxon owns a majority of Imperial Oil, the lead partner on the project.
The Alaska pipeline would carry more natural gas -- four billion compared to one billion cubic feet -- making it cheaper. In addition, there's concern TransCanada's pipeline will come online first because of a provision included in a broad U.S. energy bill that would bring costs down. The provision would increase federal loan guarantees for the Alaska gas pipeline from $18 billion to $30 billion. Meanwhile, the Mackenzie project has suffered from delays and cost overruns, which is only adding to fears for its chance of survival.