The decades-long, stop-and-start effort to commercialize Alaska North Slope natural gas has “fully shifted” to a liquefied natural gas (LNG) project, Gov. Sean Parnell said last Wednesday after receiving an update from the producer trio and pipeline company collaborating on a project, which they said could cost $65 billion or more.
“I’m encouraged that the companies have made significant progress in advancing a project and an associated schedule for commercializing North Slope gas,” Parnell said. “Clearly, they have fully shifted their efforts to an Alaska LNG project.”
That’s what he had asked producers BP plc, ConocoPhillips and ExxonMobil Corp. to do back in January (see NGI, Jan. 9) and what they and TransCanada Corp. said they would consider in May (see NGI, May 7).
Parnell’s office said the update from the companies “…harden[s] the numbers on an LNG project” and sets a timeline. The producers and TransCanada told Parnell their “megaproject” would entail “up to 1.7 million tons of steel, a peak construction workforce of up to 15,000, a permanent workforce of more than 1,000 in Alaska, and an estimated total cost in today’s dollars of $45-65 billion-plus.
The companies called for continued state support of the project and cooperation with them on fiscal terms. “As the concept selection technical work reaches closure, additional commercial agreements as well as support from the state of Alaska will be required in order to progress this world class opportunity,” they said. “This opportunity is challenged by its cost, scale, long project lead times, and reliance upon interdependent oil and gas operations with declining production. The facilities currently used for producing oil need to be available over the long-term for producing the associated gas for an LNG project. For these reasons, a healthy, long-term oil business, underpinned by a competitive fiscal framework and LNG project fiscal terms that also address AGIA [Alaska Gasline Inducement Act] issues, is required to monetize North Slope natural gas resources.”
As outlined by the producers and TransCanada, the project would include an LNG liquefaction plant with capacity of 15-18 million metric tons per year with three trains of 5-6 million metric tons per year each. Twenty-two sites have been assessed for such a facility, including Cook Inlet, Prince William Sound and other locations in Southcentral Alaska. The nearly 800-mile pipeline would be 42-48 inches in diameter and operate at less than 2,000 psi, with capacity of 3-3.5 Bcf/d. A gas treating plant could be located on the North Slope or in Southcentral Alaska.
Parnell noted ongoing cooperation between the Alaska Pipeline Project (APP), which is advancing an LNG export project, and the Alaska Gasline Development Corp., which is advancing an in-state gas project. “Deeper cooperation between these two state-backed efforts is strongly in the state’s interest,” the governor said.
In their letter this week the companies said since March they “…have built upon more than $700 million in past work by our collective companies, including the joint Alaska Gas Producer Pipeline Team effort in 2001-02, the Denali Project, and APP (including the state’s contribution through AGIA).” Recent work has included developing a design basis for the pipeline, including areas of continuous and discontinuous permafrost; investigating multiple ways to remove and dispose of carbon dioxide and other contaminants; assessing use of existing and addition of new Prudhoe Bay field facilities; and mapping multiple pipeline routing variations.
The project sponsors said they also have been assessing multiple pipeline sizes; providing for at least five in-state gas off-take points; completing preliminary geohazard and marine analysis of 22 site locations; developing a design basis for the required tanker fleet; evaluating multiple LNG process design alternatives; and confirming that a range of gas blends from the Prudhoe Bay and Point Thomson fields may generate a marketable LNG product.
Previously, the three producers met two goals set by Parnell early this year. In March the state and the companies resolved the long-running litigation over Point Thomson leases (see NGI, April 2). The following day the companies announced their alignment “on a structured, stewardable and transparent approach with the aim to commercialize North Slope natural gas within the…AGIA framework.”
While the companies have been developing LNG project design, the Parnell administration has reached out to Pacific Rim markets to highlight the advantages of Alaska LNG exports, and to other key stakeholders, including U.S. government officials in charge of export licensing. The most recent of these efforts was Parnell’s trade mission in September to South Korea and Japan, where he discussed Alaska LNG exports with leading government and industry officials. The next step for the project is the concept selection phase, the companies said.
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