Alaska pipe too pricey, say producers

Oil companies looking into the feasibility of building a natural gas pipeline from Alaska's North Slope to the continental US say the project is too pricey.
A preliminary analysis of the project by ExxonMobil and Phillips shows that the pipeline would yield only about 10 - 11 per cent return on investment, not the 15 per cent desired.

"We see this as a very high-risk project," Robbie Schilhab of ExxonMobil told Gov. Tony Knowles' natural gas development team meeting this week in Anchorage. Schilhab and Phillips Petroleum's Joe Marushack presented their preliminary conclusions at a task force meeting.

Whether the pipeline runs north through the Arctic Ocean to Canada's Mackenzie River delta or south along the Alaska Highway through Canada to the continental US, the answer is the same. For now, the project looks too expensive for Alaska's oil companies to undertake.

For both the northern Arctic route and the southern Alaska Highway route, the costs would be huge: $15.1 billion for the offshore route and $17.2 billion for the highway route.

Schilhab said the opportunity remained to make the project attractive by cutting construction costs. The companies would also want to streamline the permitting process to avoid delays.

worldoil.com