The State of Alaska proposes LNG from the North Slope

March 12, 2013

The State of Alaska (governor) proposes to finance the development of a liquefaction facility on the North Slope and a regasification facility at Fairbanks at a cost of $425 M.

North Slope gas would be turned into LNG at a 9 Bcf plant at start up and trucked to Fairbanks, where it would be converted to energy.

The State ‘finance package’ acts as a catalyst, bringing together LNG and propane customers with the private entities that will construct and operate the system. The State is investigating project feasibility and will only utilize their authorized finance tools if the project makes economic sense. Construction could begin as early as 2014.

 

Commentary

Factors that favour the project:

• The cost of energy in Fairbanks would be significantly lower if the projections are to be believed. The assumption is that North Slope gas producers would be anxious to sell natural gas under a 30 year contract at low prices. The North Slope gas is stranded from markets.
• Lower levels of air pollution from gas versus burning wood/coal.
• Taking advantage of federal incentives.

Factors that would not favour the project:

• Scarce State funds being used to reduce market pricing for some consumers may be a dubious endeavor.
• Risk of cost over-runs/project failure.
• Assumptions may be faulty on pricing, construction costs, exogenous factors.

Sources

• a)http://www.investfairbanks.com/sites/default/files/documents/2.27.13%20LNG%20presentation%20to%20Fbks%20%26%20North%20Pole.pdf



• b)http://www.gasin2years.com/criticisms