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AGDC looks at pipe first Phase 1 would be geared to providing gas to Alaskans; LNG export could follow
Kristen Nelson Petroleum News
The Alaska Gasline Development Corp. has a proposal which it hopes will advance its ultimate goal of liquefying and selling North Slope natural gas while initially helping to meet a need in this decade for natural gas for in-state use.
This proposal, AGDC President Frank Richards told the Alaska Legislature's House Resources Committee Feb. 26, would address the risk which developers see in a project dependent on building an 800-mile pipeline from the North Slope to Southcentral and meet one of AGDC's obligations, which is providing natural gas to Alaskans.
It's pricey at $10.7 billion, but not nearly so pricey as the full project, currently pegged at $44 billion, and could move 300 million cubic feet of natural gas a day south from the North Slope to Southcentral, with gas reaching Fairbanks via a 26-mile lateral line.
Alaska Oil and Gas Conservation Commission data for December show Cook Inlet natural gas production in that month averaging just over 213 million cubic feet per day.
Working with utilities Richards told the committee that as Southcentral utilities evaluate alternative natural gas supplies -- after Cook Inlet's major producer, Hilcorp, said it will not be able to renew its supply contacts at present rates due to dwindling supplies on its leases -- AGDC has been working with the utilities on delivery options.
AGDC's current proposal would break the big project into phases, with Phase 1 designed to deliver natural gas in Alaska by 2029 -- at or below the $12 to $15 per thousand cubic feet estimated cost of the imported LNG the utilities are considering.
While the immediate goal would be natural gas delivered to Alaskans, the remainder of the big project -- the Arctic Carbon Capture plant on the North Slope, compressor stations along the pipeline, the Cook Inlet pipeline crossing and the LNG facility at Nikiski -- could be built as the big project advances.
Richards said that as the ACC plant, compressor stations and LNG facility are built, gas production could gradually increase, feeding an initial first train at the LNG facility -- three are planned -- and ramping up from there.
Gas by 2029 Richards said AGDC would be able to deliver natural gas for Alaskans by 2029 because it has all major permits and could move the pipeline portion of the project into construction quickly.
The ACC plant on the North Slope would not be required for delivery of pipeline quality natural gas to Enstar because Enstar's specifications allow up to 3% CO2, while the ACC plant is required to meet the requirement that gas going into an LNG facility have less than 50 parts per million CO2.
Contracting for a gas supply could also be simpler as the initial volume would be a fraction of that required for the LNG plant and while the major project would require contracting with multiple producers, the initial phase could require contracting with just one of the major North Slope producers, ExxonMobil, ConocoPhillips and Hilcorp.
The project would also need long-term contracts to purchase the gas from Alaska utilities and contracts for additional volumes from an industrial user.
Richards said that while utility support is needed now, the utilities would not need to commit to volumes until final investment decision in 2025.
The project would also need an industrial customer, and Richards said Nutrien is evaluating restarting two ammonia units at its Nikiski plant, which ceased operation in 2008 when it could no longer get Cook Inlet natural gas. The contract price for Nutrien, he said, would need to be low enough to support its project economics, but whatever they could pay would reduce the cost to utilities.
To meet timeline Richards said AGDC needs $50 million by July 1 to begin FEED, front-end engineering and design, which would take 12 months, and is in discussion with investors to raise that money.
AGDC is working with a "credible North America pipeline company" which would lead the final FEED, as well as construction and operation. Richards said he couldn't name the pipeline company but described it as a major company.
The target for a final investment decision and start of construction is 2025, Richards said, with first gas in 2029.
Construction would take place over four years -- three winter seasons and two summer seasons.
As for the full $44 billion project, Richards again said that having the pipeline constructed removes a major risk factor for investors. He said phasing construction of the LNG plant becomes a viable option with the pipeline in place, allowing more flexibility in financing and construction, with building the plant in phases reduces the initial capital for investors.
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