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Exxon Mobil Corp. (XOM) and TransCanada Corp. (TRP) said Thursday they will work together to build a $26 billion natural gas pipeline from Alaska's North Slope to Canada and the contiguous U.S.

The announcement ends more than a year of speculation about whether Exxon would join TransCanada in its Alaska pipeline venture, or whether the Texas-based oil major would back a rival project being developed by ConocoPhillips (COP) and BP PLC (BP).

"TransCanada envisions that our combined activities with Exxon Mobil, along with the support of the state of Alaska, the U.S. and Canadian governments, and other interested parties, will result in the timely completion of the project," TransCanada said. "Today's announcement is an important step toward that goal."

TransCanada's deal with Exxon comes several months to a year before the Canadian pipeline company was planning to solicit interest in the pipeline from Exxon and other Alaska gas producers through an open season.

"ExxonMobil and TransCanada have the experience, expertise and financial capability to undertake this project," Rich Kruger, president of ExxonMobil Production Co., said in a statement.

BP and ConocoPhillips also have scheduled an open season for their proposed pipeline, called the Denali Gas Pipeline, in 2010. Both sets of developers are working with federal regulators in what's called a "prefiling" procedure to ensure they have all the data and information needed to file a formal project application.

Exxon Mobil's participation adds heft to TransCanada's project, which is backed by the state of Alaska.

Until now, the two projects were vying for the support of Exxon Mobil, of Irving, Texas. The company controls the biggest share of natural gas resources on Alaska's North Slope.

The North Slope holds some 35 trillion cubic feet of known gas reserves and the state estimates undiscovered reserves could bump this figure to as much as 250 trillion cubic feet. By comparison, U.S. consumption in 2007 was just over 23 trillion cubic feet.

Alaska Gov. Sarah Palin's administration lauded Exxon's agreement with TransCanada, saying it validated a license the state awarded TransCanada for its pipeline project that includes a 10-year tax freeze for gas shippers, among other incentives, in exchange for the company's agreement to certain terms favored by the state.

"I think people should be excited," said Kurtis Gibson, deputy director of the Alaska Division of Oil and Gas in Anchorage. "It's a validation of the state's process. Exxon recognizes that the course that the state has set is the appropriate course for commercializing North Slope gas."

U.S. Interior Secretary Ken Salazar also praised the deal on behalf of himself and President Obama, calling it an important step in bringing new gas supplies to the contiguous U.S. "We recognize there are two very strong project proposals, both aiming toward a 2010 open season and both now supported by major gas producers that control vast proven reserves of North Slope gas," Salazar said in a statement. "We look forward to working with all stakeholders involved with this project."

A comment by BP indicated that the door may be opening for the four companies to negotiate one shared gas pipeline project. "Our goal is to get North Slope gas to market," Steve Rinehart, BP's Alaska spokesman said.

The companies have been under pressure to work together on one pipeline, most publicly by the Federal Energy Regulatory Commission, which is working with TransCanada and BP and ConocoPhillips on their separate projects.

In August, FERC volunteered to help merge the two pipeline projects into one, saying it didn't make sense to build two pipelines, given the magnitude and cost, and that evaluating two duplicate pipeline applications was straining the agency's resources.

Both projects, which will likely take 10 years to complete, are aimed at connecting Alaska's gas reserves to infrastructure in Alberta, Canada. The Denali pipeline would move 4 billion cubic feet a day, while TransCanada's pipeline, which could be expanded by a third, would bring 4.5 billion cubic feet a day.

Shares of Exxon were recently trading 75 cents, or 1%, higher at $74.59; shares of TransCanada were up 78 cents, or 2.6%, at $30.56; ConocoPhillips shares were up 40 cents, or 0.9%, at $46.16; and BP's American depositary shares were up 54 cents, or 1%, at $52.70.

-By Cassandra Sweet and Angel Gonzalez, Dow Jones Newswires; 415-439-6468; cassandra.sweet@dowjones.com

(Isabel Ordonez contributed to this article.)