UPDATE 4-Exxon, TransCanada raise Alaska pipeline estimates

* Line to Alberta to cost $32 bln to $41 bln

* All-Alaska route to cost $20 bln to $26 bln

* Files open season plans with FERC
(Adds details on estimate hike. In U.S. dollars unless noted)

By Scott Haggett and Yereth Rosen

CALGARY/ANCHORAGE, Jan 29 (BestGrowthStock) – TransCanada Corp
(TRP.TO: ) and partner Exxon Mobil Corp (XOM.N: ) boosted their
cost estimates for a planned line to carry Alaska gas to
southern markets by up to 58 percent on Friday, as the two
ready plans to sign up shippers for the massive project.

The companies said the cost of the 1,700 mile (2,700 km)
pipeline carrying at least 4.5 billion cubic feet of gas daily
from Alaska’s North Slope to Alberta will range between $32
billion and $41 billion, up from a previous $26 billion
forecast.

The line, mulled for more than a generation, would be among
the largest and most expensive civil engineering projects ever
undertaken in North America, requiring years of planning and
construction and massive financing.

“No matter how you measure it, the Alaska Pipeline Project
would be an exceptional world leading project and one of the
largest private investments in the history of North America,”
Paul Pike, Exxon Mobil’s senior project manager for the line,
said on a conference call.

For Alaska, which depends on oil for nearly all its state
operating revenues, a natural gas pipeline is seen as
economically crucial. North Slope oil production has dwindled
to a third of the 2 million-barrel-a-day peak reached in 1988,
and continues to decline.

Some political leaders hailed Friday’s announcement as a
big step toward reaching the gas pipeline goal.

“Bringing Alaska’s gas to market presents a tremendous
economic opportunity for the state,” Alaska Governor Sean
Parnell said in a statement. “Alaskans have waited 30 years to
advance this project, and today’s news marks a significant
milestone in achieving this opportunity.”

A smaller line, running from the gas fields of the North
Slope to a separately built liquefied natural gas facility near
Valdez, Alaska, would cost between $20 billion and $26 billion
and could be built instead of the larger project if shippers
chose the option.

The backers said their cost estimate rose over initial
projections because of an extension of the line to the Point
Thomson field on Alaska’s North Slope, an expanded
gas-processing plant and more detailed engineering than first
available.

OPEN SEASON PLANNED

The new estimate for the lines, which could be in service
by 2020, came as the partners filed plans with the U.S. Federal
Energy Regulatory Commission (FERC) to hold an open season to
attract potential shippers.

“This open season will test potential customers’ interest
in utilizing the Alaska Pipeline Project to transport their
natural gas to market,” said Tony Palmer, TransCanada’s
vice-president of Alaska development.

Calgary-based TransCanada is the state of Alaska’s
preferred pipeline sponsor and holder of a state license under
the Alaska Gasline Inducement Act (AGIA).

It added U.S. energy major Exxon Mobil, one of the three
major North Slope natural gas producers, as a partner to its
proposal last year. The other two producers, BP Plc (BP.L: ) and
ConocoPhillips (COP.N: ) are backing a rival pipeline plan of
their own and Exxon itself has yet to commit its gas to the
line.

However the two partners expect that they’ve squeezed the
cost for shippers down, making their proposal attractive. They
plan to a 20 percent capital risk in the project, reducing the
costs needed to be covered by customers by between $6 billion
and $8 billion.

As well, they’ve cut their planned return on equity to 12
percent instead of the 14 percent return TransCanada had
forecast in its AGIA filing.

Including those cuts and other smaller factors, the
partners expect shippers who commit during the open season will
pay $500 million less per year on tolls than forecast in the
AGIA application.

“Assuming that FERC approves our plan as filed, and …
the customers commit their gas in that initial open season,
they will see lower tariffs,” Palmer said. “They will see lower
tolls to their account on the order of $500 million per year.”

Still, the rival Denali project, backed by BP and Conoco,
is going ahead as planned, with its own open season scheduled
to launch in April.

“I am confident that we will have an attractive commercial
offer for our potential customers,” said Bud Fackrell, Denali’s
president. “Today’s announcement by TransCanada and Exxon
doesn’t change anything for us. We’re on track.”

TransCanada has offered BP and Conoco an equity stake in
its project, saying the support of all three producers, as well
as the state, is needed before its project proceeds. However
negotiations with the rival producers have yet to take place .

TransCanada and Exxon filed plans for the open season with
FERC, which has 90 days to approve the proposal. A separate
open season will be staged for the Canadian portion of the
line.

TransCanada shares fell 11 Canadian cents to C$34.17 on the
Toronto Stock Exchange while Exxon dropped 53 cents to $64.43
in New York.

($1=$1.07 Canadian)

Stock Money

(Editing by Jeffrey Hodgson and Rob Wilson)

UPDATE 4-Exxon, TransCanada raise Alaska pipeline estimates