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High price tag dims hope for Alaska LNG

October 22, 2012

ExxonMobil, ConocoPhillips and BP, the main North Slope producers, plus pipeline company TransCanada have provided their initial view on the cost of building a pipeline from the north slope to SE Alaska and building an LNG export terminal -$45 to $65 B.

This project would involve an approximately 800-mile buried pipeline from the Prudhoe Bay field on Alaska’s North Slope to Southcentral Alaska, possibly Valdez, possibly Nikiski or somewhere else closer to Anchorage. At the port, a plant would chill the gas to minus 260 degrees to create liquefied natural gas, or LNG, a compressed form of the gas that can be shipped on special tankers to markets worldwide. The pipeline under consideration by the major North Slope producers would carry 3 billion to 3.5 billion cubic feet of natural gas per day. Alaskans would use some of this gas, and some gas would be consumed running the pipeline and LNG plant. The plant would make 15 million to 18 million metric tons a year of LNG, the equivalent of 2 billion to 2.4 billion cubic feet a day of gas.

Meanwhile the ideas of trucking compressed natural gas from the north slope to Fairbanks are under consideration. The two partners pegged the cost at $200 million, including an LNG plant, about 40 trucks, storage, plus a plant to regasify the LNG in North Pole. Startup would be early 2014. They said engineering has begun but the project is in its very early stages of development.

Both companies said they would use the gas – about 20 million cubic feet a day on average – to replace more expensive fuels. Golden Valley would burn the gas at its North Pole power plant and save an estimated $1 million a month in fuel costs. Flint Hills would burn gas at its North Pole oil refinery. In 2012, the Alaska Legislature passed measures to help this project along. It provided $3.75 million to Golden Valley for engineering and design of an LNG facility and $15 million in state payments or tax credits to businesses that create LNG storage facilities.

The Office of the Federal Coordinator provides (source a below) provides a succinct description of the alternatives.


The recently announced cost $45 to $65 B is a major shock. The port authority continues to tout the LNG export idea in speeches, op-ed columns and interviews. However, at such a high price development is unlikely.

Perhaps the $200 million project will fly. It’s easier to get off the ground than the $45-65 billion idea.