LNG

The US Federal Energy Regulatory Commission has finally approved permits for the construction and operation of the Alaska LNG project and the State-backed Alaska Gasline Development Corp. (AGDC)  will now decide if the economics can attract investors and allow the long-awaited venture to go ahead.

“FERC’s authorization validates that the Alaska LNG project can be safely built and operated, delivering numerous potential benefits with manageable environmental impacts,” said AGDC President Frank Richards.

“This approval signifies the completion of a rigorous and comprehensive evaluation that has engaged environmental and energy experts at dozens of federal and state regulatory agencies,” added Richards.

Analysts noted that obtaining FERC approval significantly de-risked the project execution with defined environmental stipulations.

The project was launched almost 10 years ago and there is still some hope that LNG would be produced and exported by 2026 after engineering, construction and production costs were estimated at around $43 billion.

However, the timing could not be worse for seeking investors amid the oil price slump and only a partially recovery at present above $30 per barrel.

Chinese energy companies and banks had previously expressed interest in taking part in the Alaska venture, though they disappeared from the picture when the US-China trade dispute broke out.

The FERC permit grants building consent for a liquefaction facility on the Kenai Peninsula designed to produce up to 20 million tonnes per annum of LNG for export.

It also include permission to construct and operate a pipeline of 807 miles in length and capable of transporting up to 3.9 billion cubic feet of gas per day to the liquefaction facility from a gas treatment plant located at Prudhoe Bay in the North Slope, as well as two additional natural gas pipelines connecting production units to the gas treatment plant.

The Department of Energy has also authorized export permits for 20 MTPA to be supplied to nations with or without a Free Trade Agreement with the US.

“The Alaska LNG project is the last remaining LNG project before FERC covered by the Fixing America’s Surface Transportation Act (FAST-41 Act),” said the regulator in reference to a fast-track measure required by Congress.

“The Commission took action today ahead of the scheduled June 4, 2020, final decision set by the statute,” the FERC explained.

“The federal authorization is a key step in determining if Alaska LNG is competitive and economically beneficial for Alaska,” said Alaska Governor Mike Dunleavy.

“I commend the AGDC team for their diligence. The ongoing project economic review and discussions with potential partners will determine the next steps for this project,” added Dunleavy.

Alaska’s Congressional delegation, Senator Lisa Murkowski, Senator Dan Sullivan and Representative Don Young welcomed the FERC decision and issued a joint statement.

“We commend the continued work by both FERC and AGDC to advance the Alaska LNG project to this key point,” they said.

“The certificate issued by FERC is the culmination of years of work and will be a major asset for both investment in Alaska and our nation’s long-term energy security,” they added.

“Development of our vast natural gas resources will further expand North Slope opportunities and could be a game-changer for our state economy,” the three politicians stated.

The biggest commercial advantage of adding a major liquefaction facility in Alaska is the shorter shipping route to Asia than from the Gulf Coast, where four of the six US LNG export facilities currently in operation are located.

The AGDC, along with energy companies such as ExxonMobil with North Slope assets and who will supply the feed-gas, has given a contract to engineering company Fluor Corp. to update the 2015 estimate that the project would still cost $43Bln to complete. 

The Alaska Gasline Development Corporation (AGDC), owner of the proposed Alaska LNG project, has started replying to regulatory questions on environmental mitigation measures as its main partner in the venture, ExxonMobil Corp., has sent a supporting letter.

Alaska Gasline Development Corp., the state agency overseeing the Alaska LNG project, said it signed an agreement with ExxonMobil Corp. and BP to cooperate on ways to advance the venture by working together to improve the project’s competitiveness and its progress to gain regulatory permits.

Alaska Governor Michael J. Dunleavy has named four new members to the seven-member board of directors governing the Alaska Gasline Development Corp., the state company aiming to build the Alaska LNG project to supply Asian nations.

Governor Dunleavy, a Republican, named two oil and gas industry supporters, Doug Smith and Dan Coffey, both of Anchorage, to replace outgoing board members Hugh Short of Girdwood and Joey Merrick of Eagle River.

The two other appointees were Department of Labor Commissioner Tamika Ledbetter and Department of Environmental Conservation Commissioner Jason Brune to serve as State of Alaska department-level members of the AGDC Board.

The Alaska LNG developers are expected to spend up to $45 billion to build an 800-mile gas pipeline from the North Slope in northern Alaska to a planned liquefaction plant in Nikiski on the Kenai Peninsula, south of Anchorage.

A gas processing plant, needed mainly to remove carbon dioxide from the Prudhoe Bay gas, would also be built on the North Slope.

“Alaskans have long focused on the benefits of reduced energy costs, bringing our rich energy resources to market and monetizing our North Slope gas,” said Dunleavy

“The announcement continues those goals, while putting in place the personnel to make diligent review of the project,” he added.

“AGDC is tasked with a very complex mission and I look forward to seeing how best the State can assist in moving a project forward,” he explained.

“Each one of our appointees bring a wealth of knowledge and experience to table, including in areas of resource development, labor and workforce, regulatory issues and oversight, and I look forward to working closely with them in the future,” stated Dunleavy.

AGDC is governed by a seven-member board of directors, five public members and two principal department heads of the State of Alaska.

Board members are appointed by the governor and subject to confirmation by the legislature.

The four new members will join existing AGDC board members Dave Cruz of Palmer, Alaska, David Wright of Anchorage, and Warren Christian from the town of North Pole.

The board changes come as AGDC is expected to sign a final joint development agreement with Chinese investors by the end of the first quarter of 2019.

These include companies such as China Petroleum & Chemical Corp., known as Sinopec, and Chinese banks.

Dunleavy was sworn in as Alaska's governor on December 3. The former incumbent, Bill Walker, was an independent and dropped his re-election bid in October.

Dunleavy, a former state senator, won office by defeating Democratic former US Senator Mark Begich in November’s election.

The first agreement with Sinopec, a potential main customer for the project, was signed by AGDC in November 2017 to purchase up to 75 percent of the venture’s expected 20 million tonnes per annum of output.

The initial accord was signed during President Trump’s state visit to China in the presence of Trump and Chinese President Xi Jinping.