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Alaskan Pipe Dreams

By Mark Whistler

Tickers in this Article: COP, TRP

Alaska recently announced a state-sponsored competition to tap its lucrative North Slope. Now the question is, who will get a piece of the action?

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Energy giant ConocoPhillips (NYSE:COP) was the first to submit a pipeline proposal, but being first isn't a guarnettee of success. There have been five formal applicaitons to get in on the project. ConocoPhillips' didn't submit a formal application, and its proposal doesn't meet Alaska's requisites for $500 million in state funding, but this doesn't mean it's out of the loop just yet. (To learn more, read Oil And Gast Industry Primer.)

ConocoPhillips' Big Deal
ConocoPhillips proposed a $42 billion pipeline, perhaps the largest of its kind in history. The Associated Press reported this is the first proposal in the state-sponsored pipeline competition. The line will tap the rich Alaskan fields where the industry has identified about 36 trillion cubic feet of proved reserves that could be ready to ship in the next 10 to 12 years.

One of the major keys here is that ConocoPhillips is not seeking any state funding for the project, which significantly increases the potential for the completion of the project. However, even though ConocoPhillips has formally filed a proposal - not an actual application - for the pipeline, there's still the issue of conforming to the Alaska Gasline Inducement Act (AGIA).

This deal is far from a sure thing. Alaskan government officials have said the state is also looking for smaller companies to work with. Reuters recently quoted Governor Sarah Palin as saying, "We'll hear them [Conocophillips] out, but they won't be considered under this AGIA process."

Who's Who
Five formal applications were submitted for the pipeline. The applicants are: Alaska Gasline Port Authority, which proposes a liquefied natural gas project; AEnergia LLC; TransCanada (NYSE:TRP) in partnership with Foothills Pipe Line Ltd; China-based Sinopec ZPEB; and the Alaska Natural Gas Development Authority, which proposes a spur line to Alaska's population centers.

What's important to note is that TransCanada is Canada's No.1 pipeline company, and is, well, simply put: Canadian. A large protion of this pipe would be running through Canada, and as many on Wall Street know, most countries prefer lucrative deals to go to national companies even if they say they don't play favorites. It makes sense; keep it local, and keep the cash within the borders. But we're a global economy, and it's hard to imagine that outside companies will not have a hand in the deal in the end. (For releated reading, check out Unearth Profits In Oil Exploration And Production.)

Long Shot is Worth a Shot
It may seem like ConocoPhillips has been snubbed, but that's probably not the story. The current Alaskan administration will likely select the winning proposal in early 2008, so big news is just around the corner. Regarding ConocoPhillips' proposal, Govenor Palin stated it would be reviewed, at the very least. What's important to remember here is that ConocoPhillips has the capital to expedite the pipeline, which Alaska has said it would like to have online by 2018.

The Alaskan government would be crazy to not include the energy giant in the deal, perhaps even by bending the rules a little. What all of this means is that while nothing is certain, look for news of ConocoPhillips' inclusion in the North Slope pipeline in early 2008. It is a long shot, but something investors will definitely want to watch for.

By Mark Whistler

Mark Whistler is a trader, author and analyst. He is the senior market strategist at TradingMarkets.com and heads the Forex Trading Service Forex Force.

His books include "Trade With Passion and Purpose" (2007), "Trading Pairs" (2004), "Profit from China" (2006) and "Profit from Uranium" (2006). Mark's newest book, "The Swing Trader's Bible", co-authored with CNBC/Fox News regular guest Matt McCall, will be on shelves in the summer of 2008.

Whistler is also the founder of WallStreetRockStar.com and writes regularly for TraderDaily.com. In his spare time, Whistler operates an art gallery in Baltimore, Md., along with Eats For The Streets, a growing organization - dedicated to helping the homeless across America.

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