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Signing of framework agreement moves Alaska LNG project forward
Kristen Nelson Petroleum News
At a Jan. 6 press conference on Alaska's energy future, Alaska Gov. Mike Dunleavy said in the past he hadn't wanted to talk about a gas line from the North Slope because he wasn't seeing any tangible results from efforts, with cost, size and engineering all challenging.
Now there has been significant movement, the governor said, and he believes the project is closer to reality than ever, with investors and customers looking at it.
Frank Richards, president of the Alaska Gasline Development Corp., announced an agreement at the press conference reached by AGDC with a private company. "AGDC has reached an exclusive framework agreement with a qualified energy company to privately lead and fund the development of the Alaska LNG project," he said.
Richards did not name the company, saying nondisclosure agreements govern ongoing work, and noting that the Alaska Legislature gave AGDC the ability to work on confidential documents.
With terms of the framework agreement negotiated, both parties now need "to create legally binding development agreements that will move the project forward," he said.
The framework agreement covers the Arctic carbon capture plant on the North Slope, the liquefied natural gas export facility in Nikiski and the pipeline -- all phases of the project, including the initial pipeline phase, full gas treatment and full liquefaction. Binding project agreements will lay the framework for how to proceed to a final investment decision, Richards said.
When definitive agreements are finalized, work which will occur over the next few months, there will be a formal joint announcement with the company involved, Richards said.
What has changed The current framework agreement follows "10 years of planning, engineering and permitting," Richards said.
AGDC received its final federal authorizations in 2020, he said, followed by an updated authorization to export to non-free trade countries in 2022.
Recent events encouraging interest in the project include the Russian invasion of the Ukraine and the Middle East conflicts, Richards said, increasing interest in the Alaska LNG project much as the 1973 oil embargo increased interest in the Trans Alaska Pipeline, with increased interest from developers and offtakers in Asia, Wall Street, the Gulf Coast.
Recent Alaska developments include completion of a third-party analysis required by the Legislature of AGDC's proposed phased approach which would start with the pipeline portion, delivering natural gas to Cook Inlet from Great Bear Petroleum, which has gas sources south of Prudhoe which do not require the gas treatment plant at Prudhoe which gas from that field would require.
AGDC told the Legislature earlier in the year that for a pipeline operator to take on and execute the FEED phase, a backstop agreement was required providing surety that if the project did not go forward the operator would be repaid for the FEED cost -- up to $50 million.
The board of AIDEA, the Alaska Industrial Development and Export Facility, voted in early December to authorize negotiation of a $50 million letter of credit to provide backstop remaining front-end engineering and design costs for the project.
Richards said once the agreement is finalized, work will begin on the final development stage, front-end engineering design, FEED, which will provide information required to make the final investment decision for the project, estimated at $44 billion.
He said the AGDC team is working to finalize the framework agreement as quickly as possible so Alaskans can begin to benefit from North Slope natural gas, while "following a methodical step-by-step approach to protect the interest of all stakeholders, including Alaskans."
--KRISTEN NELSON
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