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Alaskans Offer Another LNG Export Plan

The Alaska Gasline Port Authority (AGPA), in the latest bid to get natural gas from Alaska to market, says it has another buyer to replace Sempra Energy and has offered to take the state's royalty gas off its hands. The Port Authority plan is to build an 800-mile, 3 Bcf/d intrastate pipeline from the North Slope to Valdez, where the gas would be liquefied and shipped to the West Coast of the Lower 48.

The group made its offer as the Alaska governor was making his own attempts to speed up the negotiations with the big three Alaska producers, BP, ExxonMobil and ConocoPhillips, on a plan to carry the gas south. The AGPA, led by the City of Valdez, the Fairbanks North Star Borough and the North Slope Borough, would not disclose who the new buyer for the gas was. Sempra backed out of the project last month, citing "little or no progress" being made with key players in the development process (see Daily GPI, June 6).

The latest from Gov. Frank Murkowski is that the negotiators will come up with an agreement before the fall. Rumors are that the announcement is not far off, which has generated some new political activity. The AGPA fears the governor's plan will simply call for more feasibility studies and prep work and will not set a date for starting construction. They expect there will be a special session of the legislature to discuss the proposal and they want to have an alternative ready.

While about 8 Bcf/d is being produced from the North Slope, most is reinjected to improve oil production. The state doesn't get any royalties unless the gas is sold. The AGPA, however, says it is prepared to take the royalty gas, which at 12.5% would be about 1 Bcf/d and get it to market as LNG. A pipeline from the North Slope to Valdez and construction of an LNG liquefaction train is feasible, they said, because there are other producers besides the big three who are looking to produce their gas and send it south.

The AGPA's most recent plan to spur development follows on another one proposed last week by several Alaska lawmakers and labor leaders that would place a tax on the booked Alaska natural gas reserves of producers until they place into service a natural gas pipeline to the Lower 48 states (see Daily GPI, July 25).

The Alaskans are agitating to get their gas to market and collect the royalties because they fear that they could be blocked out of the market by LNG imports from overseas and the proposed Mackenzie Gas Pipeline, tapping gas in Canada's Northwest Territories. Some analysts agree that the window of opportunity is closing as LNG liquefaction projects sprout up around the world.

AGPA spokesman Jomo Stewart noted that the large producers have projects underway to produce and liquefy gas from Australia and they will lose out if they don't get production going in five years. This is typical, he said. "These foreign countries are pushing to get their gas developed and get the cash. Alaska doesn't have any deadline so we've been put on the back burner."

Meanwhile, he said a top producer executive made a statement recently that the reality is that since Canada is a sovereign country, and an Alaska pipeline to the Lower 48 would have to go through Canada, there won't be an Alaska gas pipeline before there is a Canadian gas pipeline. That reality argues for the AGPA's LNG plan, Stewart said.

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