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Valdez Port Favored for Alaska LNG Export

April 30, 2012
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Alaska's Port Valdez in Prince William Sound has a number of advantages over the Cook Inlet as the site for a liquefied natural gas (LNG) liquefaction and export facility that could one day export 15-20 million metric tons per year of Alaska-sourced LNG to Asian markets, according to a recent study.

The study was performed by a ship pilot with 26 years of experience and more than 5,000 vessel movements in Alaska on behalf of the Alaska Gasline Port Authority (AGPA), a longtime advocate of exporting LNG from the state.

The evaluation considered Prince William Sound and Cook Inlet for the potential of hosting large LNG tankers. It also evaluated tides, ice, wind, dredging requirements, the increased size of LNG tankers as well as existing infrastructure required to safely support operation of the largest LNG tankers in the world.

According to the study, "the Port of Valdez has already proven that it is a world-class oil export facility with the infrastructure in place to export large volumes of North Slope gas in the form of LNG from Alaska...Valdez is the port of preference for the export of Alaska LNG using large LNG tankers since it is an ice-free, deepwater port, closest to existing infrastructure."

AGPA general counsel Bill Walker said these are the same reasons Port Valdez was chosen to be the site for oil exports in the 1960s and was later selected by El Paso Natural Gas for an LNG port as part of an all-Alaska gasline proposal in the late 1970s.

"The founders of the Yukon Pacific Corp., the late governors Bill Egan and Wally Hickel, also selected Port Valdez and were successful in obtaining the numerous federal and state senior environmental and regulatory permits for the gasline to Valdez as well as an export license for LNG from Anderson Bay in Port Valdez," Walker said.

AGPA has been touting a North Slope gas commercialization concept that includes a pipeline from Prudhoe Bay to Valdez, liquefaction and liquids extraction facilities in Valdez and a gas conditioning plant in Prudhoe Bay. AGPA has been working on such a project for years (see NGI, Jan. 21, 2008). "Now it's one of the last projects [to commercialize Alaska gas] standing," Walker said.

"The silliness of going into the Alberta Hub and selling gas there when it costs $6 to get it there and the price there is $2; that doesn't work so well. So it's one of the last project's standing. Finally, we have the likes of Exxon, BP and ConocoPhillips and even TransCanada and the state all saying LNG is the way to go...[see NGI, March 26]."

In Walker's view, the Alaska Gasline Inducement Act (AGIA), a cornerstone of the administration of former Gov. Sarah Palin that sought development of infrastructure to carry Alaska gas to the Lower 48, was a wild goose chase of study after study and poor project economics.

"We're sort of back to the large line: Prudhoe Bay to Valdez, previously permitted, previous export license, previous EIS [environmental impact statement] and on and on and on," Walker said. It's sort of been rejuvenated, I would say, where we think the focus should have been all along."

Walker said he's not concerned about other LNG export projects in Western Canada, Oregon and the U.S. Gulf Coast that would serve Asian markets. "We beat all those projects on economics because of our proximity to the market, our high Btu content," he said. "This is all associated gas, not shale gas.

"...[W]hen [ExxonMobil CEO] Rex Tillerson and [BP plc CEO] Bob Dudley and [ConocoPhillips CEO] Jim Mulva came up here I was invited to the meeting. And they stood up and said, 'fix your oil taxes; we'll study LNG.' Sometimes it's not what is said but who has said it. I think that when those three started using the term LNG and Asia in the same sentence with Alaska, it was a significant change..."

An LNG facility at Valdez as envisioned by AGPA would have up to four trains with capacity of five million metric tons per train. As such it would be much larger than projects that have been proposed elsewhere in North America. "We inject 8.4 Bcf/d," Walker said. "So that would take 2.7-3.3 Bcf of gas to do a project that size. So the sheer volume that we have makes us a tad bit different."

Meanwhile, legislation (HB 9) that seeks to develop an in-state 500 MMcf/d bullet gasline in compliance with AGIA (see NGI, April 2) has passed the Alaska House and was stuck in Senate committee during lawmakers' regular session. It is part of a special session called by Gov. Scott Parnell.

In an editorial published last Monday in the Anchorage Daily News, state Reps. Mike Chenault and Mike Hawker wrote in support of HB 9 and said it "is not merely about a one-time, in-state 'bullet line' from the North Slope to Fairbanks and Southcentral. House Bill 9 creates a strong, able entity to serve as Alaska's gas pipeline corporation..."

The lawmakers wrote that the "future is uncertain" for Alaska's pipeline efforts. Will AGIA efforts continue to focus on a Lower 48 pipeline? they asked. "Will the producing companies and [AGIA licensee] TransCanada [Corp.] align along a new Alaska export project? Would that happen under AGIA, or will a partnership require a new framework that [the Alaska Gasline Development Corp.] can provide?"

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