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AGDC: goal private sponsor by year end
As Alaska LNG moves toward final FERC approval, also moves toward new project sponsor; if insufficient interest, RFP for assets Kristen Nelson Petroleum News
The Alaska Gasline Development Corp., the state entity which is the project sponsor for the Alaska LNG Project, got the final environmental impact statement for the project in March, and is scheduled to receive final approval from the Federal Energy Regulatory Commission in June.
AGDC’s goal now is to move the project to a private sponsor.
Alaska Gov. Mike Dunleavy made clear after the final EIS was issued March 6 that the state did not intend to continue as project sponsor.
“The final EIS is a milestone in the Alaska LNG permitting process - a process still with significant hurdles. … FERC licensure is an important component in determining if Alaska LNG, which must be led by private enterprise, is competitive and economically advantageous for development,” Dunleavy said.
According to the agenda for an April 9 AGDC board meeting, the board was briefed in executive session on a strategic plan outlining how AGDC would take the Alaska LNG project from state sponsorship to private sponsorship.
The state, through AGDC, took over the project in January 2017. It had previously been involved as a partner with ExxonMobil, the project lead, BP and ConocoPhillips.
In April 2017 AGDC filed an application with FERC covering authorization to construct and operate a new gas treatment plant on the North Slope; pipeline segments on the North Slope; a gas transmission line from Point Thomson; an 806.9-mile 42-inch diameter natural gas pipeline; and a 200 million metric ton per year liquefaction facility at Nikiski on Cook Inlet, including an LNG plant and a marine terminal.
The final FERC order is expected June 4, but while FERC is a crucial step, dozens of major permits for the project remain in process, according to a list included with the board presentation materials.
Strategic plan A summary of AGDC plans from the April 9 board meeting says AGDC formed key relationships in 2019 with what it calls the “strategic parties” who have expressed interest in the project and with whom AGDC has been collaborating; extension of those strategic party agreements is planned.
Those parties have not been named.
AGDC has also been cost sharing with BP and ExxonMobil, which will continue through June, focused on completing work with FERC.
The board supports AGDC continuing as project sponsor through the end of the year, with transition to a new project sponsor planned to be underway by Jan. 1, 2021.
AGDC has legislative budget approval and the authority to accept up to $20 million in third-party monies which is good through June 30, 2021.
A resolution passed by the board at the April 9 meeting emphasizes maximizing the value of the state’s investment in Alaska LNG and says “AGDC will work with strategic third parties to improve the economic viability and feasibility of Alaska LNG.”
Moving forward According to a summary of the strategic plan presented at the board meeting, results of regulatory de-risking, cost reduction and economic analysis indicate Alaska LNG “has a potential to deliver LNG to markets at a competitive price, and the Strategic Parties recommend moving forward with further development of the Alaska LNG Project.”
The summary of plan assumptions further says that AGDC and the strategic parties “will continue to identify Alaska LNG Project interest from others, develop the optimal project structure, and identify a designated new Project Sponsor by December 31, 2020.”
The board does not support AGDC continuing as project sponsor beyond Dec. 31, 2020.
“In the event there is not sufficient interest from Strategic Parties to lead the Alaska LNG Project, an open solicitation of interest will be made to other parties,” the meeting materials said.
The board, administration and Legislature “will define an acceptable role, if any, in the Alaska LNG Project.”
If there is insufficient interest by a new project sponsor, “AGDC will put the Alaska LNG Project assets up for sale in a formal RFP process.”
Objectives Objectives under the plan include maintaining maximum value of the state’s investment in the Alaska LNG project, while minimizing AGDC’s spend.
AGDC, as designated project sponsor, is responsible for improving the economic viability of the project through June 30, and, in conjunction with the strategic parties, determine the feasibility of project economics.
Assuming a new project sponsor has been designated by Dec. 31, AGDC’s goal is to achieve a positive transition by June 30, 2021, based on a FEED, front-end engineering design, decision support package “including a defined equity structure, defined financing structure, transition to the new Project Sponsor(s) and funding for ongoing WP&B (work plan and budget), as appropriate.”
Plan objectives also include managing alternative scenarios, including ongoing state equity participation, suspension and archiving of the project and/or winddown of AGDC.
Work being done by Fluor on cost estimate reduction under contract is progressing with a revised LNG plant layout review conducted with producers.
Issuance of draft deliverables for review from Fluor is underway and will continue through April.
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