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Alaska LNG Project Creeps Toward State Control

Planning for the state of Alaska to take over the multi-billion-dollar project to commercialize North Slope natural gas reserves has begun. Such a transition would put the project in the hands of the state's Alaska Gasline Development Corp. (AGDC) and remove Alaska's major producers from direct participation.

"Once transitioned, the Alaska Gasline Development Corp. will be responsible for managing the project going forward, including applying for regulatory approval; securing the commercial commitments from gas sellers, shippers and buyers necessary to acquire the equity and debt financing that will be required to complete the project; and preparing to start FEED [front-end engineering design]," AGDC President Keith Meyer told the agency's board last week, according to his slide presentation from the meeting.

Gov. Bill Walker in recent months has tangled with the state's three major producers involved in the project -- BP plc, ConocoPhillips and ExxonMobil Corp. -- asserting that they have been dragging their feet on moving the project forward. For their part, the global collapse in commodity prices has drawn the economics of the $45 billion project into question, the producers have indicated. Last February, Walker and the producers said they were still committed to moving the project forward, but they were looking for ways to cut costs (see Daily GPIFeb. 17).

Since becoming governor, Walker has called for the state to have a larger stake in the pipeline and liquefied natural gas (LNG) project (see Daily GPIJuly 10, 2015). Last November, the state of Alaska bought out the stake in the project of TransCanada Corp. (see Daily GPINov. 5, 2015).

During his presentation to AGDC last week, Meyer said that the pre-FEED work on the project is more than 90% complete. "The parties are working together to consider commercial options to improve the project's ability to compete in the global LNG market," he said.

This includes transitioning the project to state leadership and "...pursuing alternative commercial structure options and concepts that have been successfully used in global LNG projects to reduce the cost of supply of the project. The goal is to have a seamless continuation of the project and maintain project momentum."

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