Alaska Gov. Sarah Palin's gasline team is expected to announce the week of May 19 whether it will recommend that lawmakers approve TransCanada Corp.'s proposal for a pipeline from the North Slope to Alberta. Meanwhile, talk of an all-Alaska gasline and associated liquefied natural gas (LNG) liquefaction plant alternative is growing louder.
Earlier this month an Alaska political delegation returned from China where its members, who included former governor Wally Hickel (see Daily GPI, March 18) and House Speaker John Harris, said they heard a persuasive argument for exporting LNG to China and elsewhere. Asian markets have been big spenders on LNG of late, and their buying power acts as a magnet that keeps LNG cargoes away from U.S. ports (see Daily GPI, May 13). Some in Alaska believe selling LNG abroad would be more lucrative than selling pipeline gas in Canada and the United States as the TransCanada proposal, as well as another from BP and ConocoPhillips, called Denali, propose to do (see Daily GPI, May 6).
Alaska already has one liquefaction plant, which has been sending LNG to Japan since the 1960s (see Daily GPI, April 23; Jan. 4). Proposals submitted under Palin's Alaska Gasline Inducement Act (AGIA) included projects with an LNG component, notably one from a partnership that included China's Sinopec (see Daily GPI, Feb. 1; Dec. 17, 2007; Dec. 4, 2007). All of the AGIA proposals but TransCanada's were deemed incomplete, however, and not given further consideration (see Daily GPI, Jan. 7).
The Denali proposal is generally similar to TransCanada's but it is being weighed outside of the AGIA process (see Daily GPI, April 9). To appease LNG plant proponents, Palin's gasline team has said it would include consideration of an LNG option in its deliberations on the TransCanada proposal.
For some, the potential for Alaskan LNG exports raises questions about U.S. gas supply security. Speaking Thursday at the Platts annual LNG Conference in Houston, Darren Jones, ConocoPhillips president for global gas, said potential LNG exports are a political issue.
"There have been some people talking about an LNG plant exporting that gas; I think there's a couple of issues with that. One is just the cost of building an LNG plant somewhere up in Alaska. It's not going to be the same as building it in the Gulf of Mexico, so the already expensive LNG plant would be much more expensive up in Alaska," Jones said. "The other thing is the strategic value of Alaska's gas to the United States. I think the senators from Alaska when they heard that Sinopec made a bid...were ready to go and pass a bill that said the gas can't be exported.
"So then you get into OK, we'll build an LNG plant and take it to the U.S. West Coast. That sounds good except of course there are no regas facilities on the U.S. West Coast that have been approved or built or anything yet. The logical thing to us is to take the pipeline to Alberta, get it into the existing pipeline system if that's the most economic thing to do or maybe supplement it with an additional line to Chicago. Some hybrid of that idea to us looks like the most economic."
Michelle Michot Foss, head of the Center for Energy Economics at the Bureau of Economic Geology, also spoke at the conference. Unlike Jones, she does not represent a company with an Alaska gasline bid.
"We've been doing some work [at the Center for Energy Economics] for various donors on the pipeline options that are under consideration and the fiscal terms of the pipeline options that are under consideration," Foss said. "We did an early experiment a couple of years ago trying to figure out whether LNG could compete when we looked at things like Chicago citygate...What we've realized is it doesn't matter where the LNG goes. And it doesn't matter whether it comes to us. Of course, we've been selling LNG to Japan out of Alaska for lo these many years, and so why not? Why not develop that; why not get a bit of a hard currency boost for our own trade balance. It grows the pie in terms of gas that's available. It satisfies the needs of some very large customers that have been very provocative in terms of their LNG procurement anyway. And so we've been kind of rethinking that.
"Certainly the Alaskans are interested in that idea. They've got all sorts of proposals, some of them wacky. But nevertheless, this is a compelling notion and I think that actually it's getting some traction as I kind of look at the politics around the Alaska gas resource base and what's happening with it," Foss added.
For nearly anyone with something to sell, including LNG exporters, China is an attractive and growing market. Not to be overlooked, however, is Asia's longtime LNG importer, Japan, Hide Nakagami, New York representative of Tokyo Gas Co. Ltd., told the conference.
Tokyo Gas is the largest city gas distributor in Japan with more than 10 million customers. It began importing LNG from Alaska in 1969. Nakagami said that last year Japan accounted for nearly 40% of all LNG imports traded worldwide. And the country's share of the market is likely to grow as it aggressively pursues recontracting of existing supplies as well as additional LNG to fuel its growth. In 2020, Nakagami said, it is projected that there will be a 40 million ton/year shortfall in contracted LNG supplies to meet projected Japanese demand. "Volume-wise, we are gigantic. I'd like you to remember that," he gamely said.
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