The State of Alaska would love deep-pocketed multi-national oil companies to commit billions of dollars to build a pipeline to export LNG to Asia. The State will settle for an $80 M study by the end of the year.
BP, ExxonMobil and ConocoPhillips, along with pipeline builder TransCanada, along with the State of Alaska, committed to spending between $80 million and $100 million by the end of this year, and conducting field work this summer. This activity will employ about 150 people. Much of that money will likely be paid for by the state, under the 2008 state agreement that offers licensee TransCanada up to $500 million in state money to advance a natural gas project.
The project currently calls for shipping North Slope natural gas down an 800-mile-long pipeline, and liquefying it at a Southcentral Alaska coastal port for export to overseas Asian markets, estimated to cost between $45 billion and $65 billion. The companies have yet to take several key steps, including selecting an end location for the liquefaction plant, such as Valdez or Nikiski. They’ve also not altered the terms of the state agreement to officially sanction the LNG project, making state officials increasingly wary.
Alaska has an ancient LNG facility located on the Kenai peninsula. The Kenai Liquefied Natural Gas (LNG) Plant, now owned by Cononco-Phillips, began operating in 1969, after the nearby North Cook Inlet Gas Field was discovered in 1962. Nearly all LNG produced at the plant has been sold via contracts with two Japanese utilities. The Kenai LNG facility was for more than 40 years the only LNG export plant of domestic production in the United States.
Alaska’s efforts to spur LNG do not have a high probability of success. The price tag of $65 B is too high, for starters. The competition comes from around the world—the middle east, Australia and down the coast from British Columbia.