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Alaska LNG Export Project Said Close

ExxonMobil Corp., ConocoPhillips and BP plc apparently are close to finalizing a deal with Alaskan officials to build a liquefied natural gas (LNG) export terminal to transport natural gas to overseas markets.

The three oil majors and Alaska officials are said to be completing negotiations and could announce an agreement within the next few days. The reports first surfaced in the Financial Times last week and were confirmed to NGI by three independent sources.

Alaska Gov. Sean Parnell is "cautiously optimistic" that an agreement could be reached, a spokesman said. Parnell, who has been talking about an LNG option for Alaska's gas for months, in early January met with the CEOs of ExxonMobil, BP and ConocoPhillips about moving the state's bountiful gas supplies to Asian markets via LNG tankers (see NGI, Jan. 9; Oct. 31, 2011).

According to the sources, an agreement was being drawn up to include a settlement over a long-running gas lease dispute at the ExxonMobil-led Point Thomson oil and gas lease on the North Slope. Point Thomson may hold up to one-third of the North Slope's natural gas reserves.

A settlement between the producers and the state over Point Thomson could clear the way for a commercial assessment of gas resources. In his state of the state address in January Parnell urged the producers to resolve litigation over the disputed leases (see NGI, Jan. 23; Nov. 21, 2011).

During ExxonMobil's investor meeting earlier this month in New York City (see NGI, March 12), CEO Rex Tillerson and his management team said they were considering three LNG export avenues in North America: along the Gulf Coast, where the company has the Golden Pass LNG import terminal; Western Canada, where it is the largest leaseholder in the gassy Horn River Basin in British Columbia; and in Alaska. The executives offered few details.

"We are evaluating it, but nobody's doing it yet," Tillerson said. "We haven't applied for permits. We're not talking about reexporting, but exporting."

ExxonMobil's Andy Swiger, senior vice president of Upstream projects, said the company had been "studying" LNG exports from North America for a while.

"What makes us different from a number of people, from those that have jumped into the permitting, is that we have a pretty good understanding of it, having been in the business for over three decades," said Swiger. "We understand the risks involved and the capital involved in building liquefaction trains, setting up commercial arrangements.

"We believe it's appropriate that we look at all of the models to see how it would work on a global basis and give it the time and attention it needs before we decide whether it's a business worth approaching," Swiger said.

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