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Alaska LNG Plant on Hold as Pipe Projects Evolve

A liquefied natural gas (LNG) liquefaction facility planned for Alaska's North Slope will have to wait for more clarity on the future of competing gas pipeline proposals in the region, the CEO of Fairbanks Natural Gas LLC (FNG) said.

Dan Britton told the Fairbanks Daily News-Miner that plans for the facility aren't being shelved. "All those pipelines potentially affect us in a potentially dramatic way," he told the paper. "We're trying to understand what's happening on all that right now."

FNG serves its 1,100 customers with gas supplies from the Cook Inlet area that are liquefied at a plant in Port McKenzie and trucked to its service territory in the interior. A deal with ExxonMobil to supply gas to the proposed LNG liquefaction plant at Prudhoe Bay on the North Slope was announced in February (see NGI, Feb. 18).

The liquefaction plant was expected to cost $20-40 million, and trailers to carry the LNG would cost another $3-10 million. Britton said in February that FNG had been in discussions with ExxonMobil for almost a year and had talked with other North Slope producers as well. The primary driver of the project was to ensure security of supply, particularly since supplies are tight in the Cook Inlet area. Britton said a pipeline to serve FNG would be too costly for the size of its market.

However, the potential for intrastate and interstate pipeline development has caused FNG to pause on its LNG plans.

This past summer the state announced a partnership with the Alaska Natural Gas Development Authority (ANGDA) and utility ENSTAR Natural Gas Co. to build the first phase of a bullet pipeline to serve Alaska's Southcentral region (see NGI, July 14).

Construction of the bullet line would start in the south and work north. The first phase could leave Cook Inlet and reach Fairbanks and interior Alaska by 2013, the state said. Over the next five years Alaska officials hope to see discoveries of gas within the Cook Inlet basin and along the in-state pipeline's corridor. If not, the project's second phase could continue the line north to access gas supplies in the North Slope Foothills or beyond, making them available to interior and Southcentral Alaska by 2014. If phase two is not needed, the in-state line could be connected to a main North Slope pipeline that would deliver gas to the Lower 48.

TransCanada Corp. has been awarded a state concession to construct the interstate line, while North Slope producers BP and ConocoPhillips have a competing project, known as Denali. TransCanada is hoping to get producers to sign on to its project (see NGI, Nov. 3). Recently some industry leaders have raised doubts about the viability of a North Slope pipeline to serve demand in the Lower 48 given the abundance of output from gas shale plays and the potential for LNG imports, as well as softer gas prices (see NGI, Nov. 24).

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