LNG

Glenfarne has warned Alaska’s proposed gasline tax package could still leave the $13.2–16.9 billion pipeline segment of the Alaska LNG project without a viable path to completion, undermining financing just as the project seeks to take FID.

Alaska Governor Mike Dunleavy has just concluded a trade mission to Japan where he met executives of leading energy companies and utilities as well as government ministries about the Japanese companies procuring long-term Alaskan LNG supplies.

Alaska Governor Mike Dunleavy says a new analysis of the Alaska LNG export project by energy consultants Wood Mackenzie comes up with gas pricing that would by lower than some other US projects and financing could be underpinned by Federal loan guarantees offered by President Joe Biden’s $1.2-trillion Infrastructure Bill.

Hilcorp Energy of the US, a major operator on Alaska's North Slope after the departure of UK major BP from the state, is now set to take over operations of the largest natural gas field run by ExxonMobil Corp. and which would underpin any future Alaska LNG export project.

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. 

Alaska Gasline Development Corp., the lead developers of the Alaska liquefied natural gas export project, said regulators had published the final environmental impact statement for the venture to monetize North Slope gas and ship it to Asia as LNG.

The US agency that helps the Federal Energy Regulatory Commission with the permit processing for export plants and pipelines has determined that the Alaska LNG liquefaction facility proposed for the eastern shore of Cook Inlet complies with siting requirements.

ExxonMobil Corp and BP of the UK plan to invest more administrative funds with Alaska Gasline Development Corp. into the Alaska LNG project to keep it moving forward in terms of resource availability and the regulatory process.

The two energy majors will spend a further $20 million to help advance the state’s $43 billion Alaska liquefaction and export plant using their natural gas resources from the state’s North Slope reserves.

The two companies, along with ConocoPhillips, had backed out of the project as investors in 2016 amid concerns about its global competitiveness after they had already spent $500M on studies, field preparations and regulatory presentations.

Since then, the state of Alaska has tried to advance the project on its own with potential support from Chinese energy and banking companies.

Damian Bilbao, vice president of commercial ventures for BP in Alaska, said at an oil and gas conference in Anchorage that the company was optimistic that the project’s cost could be reduced to below $40Bln.

Alaska’s deputy governor Kevin Meyer said at the conference that ExxonMobil and BP had each committed an additional $10M as the project continues to refine details while it seeks authorization from the Federal Energy Regulatory Commission.

The state will cover the remaining $10 million of the expected costs before FERC makes that decision in 2020.

The Alaska project is designed to liquefy 3.5 billion cubic feet per day of gas for sale to customers in the Asia-Pacific region from a liquefaction facility to be built in Nikiski on the Kenai Peninsula, south of Anchorage.

The venture includes a pipeline of 807 miles in length linking the gas fields to the liquefaction facilities with several interconnections for domestic supplies.

The FERC recently delayed the date it expects to finally decide on the LNG project to June 2020 from February 2020.

“When the governor took office, he made it clear that we needed participants with the credentials and the resources necessary in order to make a project of this scope work,” said Meyer, the deputy of Alaska Governor Michael Dunleavy.

“The involvement of BP and Exxon provides confidence that all future decisions regarding Alaska LNG will be rooted in world-class LNG experience,” added Meyer.

Damian Bilbao, Vice President of Commercial Ventures for BP in Alaska, said the company has at least one big reason to put money into the project.

“Alaska gas remains BP’s single largest global undeveloped resource,” he said.

Bilbao said it was significant that industry and the state were collaborating on the project again.

“The state has made good progress over the last several years. And, working together with Exxon and AGDC we think we can unlock some additional opportunities,” he said.

“But we’ll just have to see in a few months after some work gets done where the project is relative to other opportunities around the world,” stated Bilbao.

ConocoPhillips has also said at the conference that it was willing to sell its natural gas to the project and was engaged with the state in negotiating a gas-sales agreement.

BP and ExxonMobil have provided technical expertise to Alaska LNG as it moves through the federal regulatory process. Last year, they signed precedent agreements spelling out the price and other terms of gas sales to the project.

AGDC has been negotiating with several parties interested in the project, though these efforts have been weighed down by the political and trade disputes between the US and China.

Alaska LNG had been expecting to sign a joint development agreement with the Chinese energy major China Petroleum & Chemical Corp., also known as Sinopec, and possible finance deals with China’s sovereign wealth fund, China Investment Corp. Capital and the state-owned Bank of China.

A formal agreement was been delayed several times because of the US-China trade dispute and has now been side-lined until trade relations improve.

The Alaska Gasline Development Corp., the US state agency responsible for overseeing the Alaska LNG project, has received a major regulatory permit for its $10-billion stand-alone North Slope pipeline to supply domestic customers and feed-gas for LNG if needed.