Four energy giants update multi-billion dollar Alaska LNG development plans

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An alliance of four energy companies has updated plans for a multi-billion dollar, ten-year liquefied natural gas megaproject that would take gas from Alaska’s North Slope for shipment to Asia through the oil port at Valdez.

Three of the companies, Exxon Mobile, ConocoPhillips and BP already have operations on the North Slope. TransCanada,which is already planning to build a gas pipeline for the Kitimat Shell project, would be the fourth partner and also work on the pipeline.

Map of Alaska LNG project The four companies filed a letter on October 1 with Alaska Governor Sean Parnell outlining the plans, The governor’s office released the letter today.

The companies told Gov. Parnell that their efforts would result in “a megaproject of unprecedented scale and challenge; up to 1.7 million tons of steel, a peak construction workforce of up to 15,000, a permanent workforce of over 1,000 in Alaska, and an estimated total cost in today’s dollars of $45 to $65+ billion.”



Related:Alaska governor meets with three energy CEOs to push North Slope LNG exports to Asia

The letter goes on to say that TransCanada’s recently completed non-binding solicitation of
interest in the project and that company “has publicly reported interest from potential shippers and major players from a broad range of industry sectors and geographic locations.” (An expression of interest, of course, doesn’t mean that buyers will actually sign contracts, as the Kitimat LNG partners are finding out)

It appears from the letter that the North Slope producers are, in the long term, worried about diminishing oil reserves and are now, like energy companies around the world, looking at cashing in on the natural gas boom.

This opportunity is challenged by its cost, scale, long project lead times, and reliance upon interdependent oil and gas operations with declining production. The facilities currently used for producing oil need to be available over the long-term for producing the associated gas for an LNG project. For these reasons, a healthy, long-term oil business, underpinned by a competitive fiscal framework and LNG project fiscal terms that also address AGIA issues [an Alaska state agency], is required to monetize North Slope natural gas resources. The producers look forward to working with the State to secure fiscal terms necessary to support the unprecedented commitments required for a project of this scope and magnitude and bring the benefits of North Slope gas development to Alaska.

Over the past few months, the partners have, according to the letter:

•Developing a design basis for the pipeline, including areas of continuous and discontinuous permafrost
•Investigating multiple ways to remove and dispose of CO2 and other contaminants
•Assessing use of existing and addition of new Prudhoe Bay field facilities
•Mapping multiple pipeline routing variations
•Assessing multiple pipeline sizes
•Providing for at least five in-state gas off-take points
•Completing preliminary geohazard and marine analysis of 22 LNG site locations
•Developing a design basis for the required LNG tanker fleet
•Evaluating multiple LNG process design alternatives
•Confirming a range of gas blends from the Prudhoe Bay and Point Thomson fields can generate a marketable LNG product

The letter concludes:

Our next steps are to complete the concept selection phase and work with the State to make meaningful progress on the items detailed above. This work is critical as we consider decisions to progress the next phases of an LNG development project.

Alaska’s North Slope natural gas resources must compete in the global energy markets in order to deliver state revenues, in-state energy supplies, new job opportunities and other economic benefits to Alaskans. While North Slope gas commercialization is challenging, working together, we can maintain the momentum toward our shared vision for Alaska. We will continue to keep you advised of our progress and stand committed to work with the State to responsibly develop its considerable resources.

Alaska LNG fact sheet
A fact sheet on the Alaska LNG project sent to the state governor by the project partners.


LNG partners letter to Alaska governor  (PDF)

Alaska governor meets with three energy CEOs to push North Slope LNG exports to Asia

Alaska Governor Governor Sean Parnell met with the chief executive officers from BP, ConocoPhillips and Exxon Mobil on January 5, 2012, to discuss alignment between the three companies on commercializing the North Slope’s vast natural gas reserves.

A news release from the governor’s office says Parnell asked  “the three companies – the major lease holders for natural gas reserves on the North Slope – to work together on developing a liquefied natural gas (LNG) project that focuses on exporting Alaska North Slope gas to Asia’s growing markets.”

The  release says that governor is targeting LNG exports to Asia to serve the growing demand for natural gas. That would make an Alaska LNG export terminal a rival to the three projects at Kitimat and another proposed project in Oregon.

Parnell and the CEOs – Bob Dudley of BP, Jim Mulva of ConocoPhillips and Rex Tillerson of Exxon Mobil – met for two hours. During the meeting, the governor’s release says, the  CEOs briefed the governor on the extensive work they’ve been doing in response to his request. After meeting with the governor, the three CEOs briefed members of the Alaska state legislature.


Governor Sean Parnell met in Anchorage Jan. 5, 2012, with the chief executive officers from BP, ConocoPhillips and Exxon Mobil to discuss alignment between the three companies on commercializing the North Slope’s natural gas reserves.(Alaska governor's office)

“I appreciate the willingness of the chief executives to come to Alaska to discuss the important topic of commercializing North Slope gas,” Parnell said. “For a gas project to advance, all three companies need to be aligned behind it. This meeting is an important step, but much work remains.”

The Associated Press reports that Parnell wants the companies to unite under the framework of the Alaska Gasline Inducement Act, which gave TransCanada Corp. an exclusive state license to build a pipeline and up to $500 million in state incentives.

AP says TransCanada has been working with Exxon Mobil to advance the project but has yet to announce any agreements with potential shippers.

TransCanada has focused most of its attention on a pipeline that would deliver gas to North American markets through Alberta to Canada and the Lower 48 states. TransCanada has also proposed a smaller pipeline that would allow for liquefied natural gas exports through a terminal at the oil export port of Valdez. A rival project, a joint effort of BP and ConocoPhillips that also would have gone through Canada, folded last year.

The Alaska Journal of Commerce reports BP and ConocoPhillips believe a major liquefied natural gas project is the best option for marketing North Slope gas, quoting the chief executive officers of the two companies Robert Dudley of BP and James Mulva of ConocoPhillips.

“Given the outlook with shale gas in the Lower 48, it looks like LNG has the best potential. We’re not saying the pipeline (to Canada) is impossible,” but a pipeline to southern Alaska to an LNG plant appears to have the best prospects, BP CEO Dudley told reporters following the meetings with Parnell and legislators.
ConocoPhillips’ Mulva agreed with Dudley. “We believe LNG is the best alternative for North Slope gas, far better than any alternatives,” Mulva said.