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Energy group proceeds with $45bn Alaska pipeline to export LNG to Asia

10.05.2012  | 

In a letter to Alaska Governor Sean Parnell, ExxonMobil, ConocoPhillips, BP and TransCanada said this week that they have agreed on a plan to combine what were once two competing natural gas pipeline projects destined for the continental US into one project aiming at overseas markets.

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By TOM FOWLER

A consortium of major energy companies said it is moving forward with a $45 billion project to build an 800-mile natural gas pipeline from Alaska's North Slope to a port on the southern coast from which it plans to export liquefied natural gas to Asia.

In a letter to Alaska Governor Sean Parnell, ExxonMobil, ConocoPhillips, BP and TransCanada said this week that they have agreed on a plan to combine what were once two competing natural gas pipeline projects destined for the continental US into one project aiming at overseas markets.

The export project may not be ready for a decade or more given the scale of construction and the many technical, legal, political and financial barriers; the companies say the costs could top $65 billion.

But it would let the companies move billions of dollars in natural gas that is now stranded on the North Slope and help support many decades more of oil and natural gas development in the US arctic.

Discussions about building a natural-gas pipeline from the northernmost reaches of Alaska started soon after the Trans-Alaska Pipeline System started moving oil to the Port of Valdez in 1977.

Since then, most natural gas produced along with oil on the North Slope has been injected into the ground to help push out more oil.

In recent years, TransCanada and Exxon backed one pipeline project while BP and ConocoPhillips pushed another. But decade-low natural-gas prices in the US because of the shale-gas drilling boom made such a pipeline to Canada, where it would connect to the lower 48 states, uneconomic.

The announcement follows a March settlement between the State of Alaska and the companies over a long-running dispute over leases at the Point Thomson field, located east of the massive Prudhoe Bay field.

The companies were allowed to keep their large leases in exchange for promises to begin first oil production from Point Thomson by 2016 and to combine their competing projects.

The new project will include natural gas processing facilities and a natural gas export terminal somewhere along the south central Alaskan coast.

In order to move natural gas via tanker it must be chilled to negative 260 degrees Fahrenheit to turn it into liquefied natural gas, which can then be moved in specially designed ships and turned back into a gas on delivery.

The companies said they are considering 22 different sites, including one near the Port of Valdez, where Trans Alaska Pipeline oil is loaded on to tankers, as well as one on the Kenai Peninsula south of Anchorage, where ConocoPhillips owns and operates a small, 40-year-old LNG export terminal that serves primarily Japanese customers.

Alaskan natural gas will face stiff competition for customers in Asian markets, said Amy Jaffe, executive director of energy and sustainability at the University of California-Davis.

Several large LNG projects are coming online in Australia in the coming years to meet Asian energy demand, and a project to export LNG from the Canadian province of British Columbia, where gas production costs may be lower, is further along.

“My sense is that Alaska LNG has a lot of competition to Asia and they do not have a first mover advantage,” Ms. Jaffe said.


The Wall Street Journal (via Dow Jones Newswires)



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