LNG

European buyers are shying away from signing long-term offtake contracts for US LNG, making it harder for new export projects to secure financing and move towards construction.

Taiwan's state-owned energy company CPC Corp is considering investing into the Alaska LNG export project, having signed an initial offtake agreement with AGDC to buy LNG from the venture. The deal was signed on a tour of Alaska’s Governor Mike Dunleavy across Asia, seeking additional investors for the $44 billion Alaska LNG project.

Cost overruns and limited firm offtake had for long delayed the Alaska LNG venture – but now the project became a priority of the US Trump administration. Gov. Dunleavy and senior officials from Alaska Gasline Development Corporation (AGDC), a state entity developing the liquefaction project, are currently touring Asia with the aim of securing firm offtake agreements and private investment.

Apart from Taiwan, utility buyers in Japan and South Korea have also been approached to step up their LNG imports as the United States seeks to balance its trade deficit with these countries.

The letter of intent (LoI), signed by CPC Corp, is not binding but could sway further Asian LNG buyers to sign on for firm offtake of Alaska LNG. As part of the LoI deal, CPC wants to invest in the export project though the exact amount is still subject to discussions.

Firm offtake its vital for project developers to reach financial close on the $44 billion Alaska LNG project, one of the most expensive liquefaction projects in the world. The venture has been government funded after ExxonMobil, ConocoPhillips, and BP backed out in 2016 citing cost concerns and headwinds from environmentalists.

Phase 1 of Alaska LNG focuses on construction of the pipeline to deliver North Slope gas to interior and southcentral Alaska and resolve energy shortages on Cook Inlet. Infrastructure to liquefy the gas and export it will be developed in Alaska LNG Phase 2.

Feedgas for Alaska LNG is meant to be sourced from Prudhoe Bay and Point Thomson fields. These fields will produce some 3.5 billion cubic feet of gas per day. The proposed liquefaction terminal in Nikiski, southwest of Anchorage is designed to process, store and transport up to 20 million tons per year (mtpa) of LNG.

Realisation of the gas pipeline, for starters, has gained traction after Glenfarne in January teamed up with AGDC agreeing to jointly Alaska Export Facility, Pipeline, and a Carbon Capture facility. Moreover, Glenfarne and ENSTAR Natural Gas Company also have agreed to advance an LNG import project utilizing the Alaska LNG export site.

Should the massive Alaska LNG venture go ahead, it would be Taiwan’s geographically closest source of US LNG given that cargoes from Alaska do not need to transit the Panama Canal to reach Asia.