Despite the growing interest by foreign markets and potentialinvestors in the proposed LNG portion of the Trans-Alaska GasSystem (TAGS), the May 22 deadline set by FERC for start-up of theconstruction of the export project will not be met, says thesponsor of the proposed facility. Yukon Pacific Co. L.P. has askedthe Commission to extend the deadline, which was set back in 1995,until May 2001, saying that a refusal by FERC would be a “serioussetback” and might cause it to abandon the LNG project altogether.

“If the [site] approval lapses, there will be a great risk thatAsian marketers will turn to other foreign sources. Yukon Pacificis competing with many other LNG suppliers around the world, and itmust show that it can be flexible in order to remain competitive,”Yukon Pacific told the Commission [CP88-105]. It also would strandthe $100 million that has been invested in the project by CSXCorp., a giant in the railway and barge industries.

The proposed plant, to be sited at Valdez, AK, would liquefyNorth Slope natural gas for shipment by tanker to the Asian nationsof Japan, Taiwan and Korea. The gas would be transported to Valdezover the proposed 796.5-mile TAGS delivery system. The LNG projectwould have a license to export about 14 million metric tons peryear, but will have the capability to increase capacity as needed.The countries of Taiwan and Korea already have signed letters ofintent for much of the LNG, says Yukon Pacific President JeffLowenfels.

The project’s “primary focus” now is “securing North Slope gassales and LNG purchase commitments and project financing,” thecompany noted. Toward this aim, “Yukon Pacific is continuing itsnegotiations with all current and potential stakeholders, includingAsian buyers, North Slope producers, relevant state and federalagencies and representatives, and potential investors in theproject.” The interest from potential investors, Lowenfels added,is “ever increasing.”

Although its role is limited to sponsor now, Lowenfels saidYukon Pacific hopes to join a consortia of investors, mostly oilcompanies, to bankroll the TAGS system, which he estimates willcost $10 billion-$15 billion, including tankers.

Yukon Pacific is projecting that LNG deliveries will begin inthe 2005-2010 time period. Allowing for eight years to complete theproject, construction should begin “no earlier than 1999, butprobably no later than 2001.” Yukon Pacific left open thepossibility that it may have to come back and ask for anotherextension for the start-up of construction.

Refusing to grant Yukon Pacific an extension this time would notbe in the best interests of the United States, Lowenfels said. Whenthe project’s up and running, the LNG exports will add $4 billionto the “positive side” of the nation’s balance of payments eachyear, he estimated. “We could sell all the Chryslers, all the rice,all the cigarettes and all the apples we want and not reach thatamount.”

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