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AGDC, Glenfarne deal set
Private party takes over from state corporation to move Alaska LNG to FID
Kristen Nelson Petroleum News
The Alaska Gasline Development Corp. has been working to recruit a private company to move the Alaska LNG Project through to a final investment decision and on March 27 AGDC and Glenfarne Alaska LNG LLC, an affiliate of Glenfarne Group LLC, said they had reached a definitive agreement.
Glenfarne becomes the majority owner of Alaska LNG and will lead "development to construction and operations of the entire project," the companies said.
Glenfarne is acquiring 75% of 8 Star Alaska, the subsidiary AGDC created to hold and manage Alaska LNG assets, assuming "the role of Alaska LNG's lead developer" for remaining development work from front-end engineering and design through to a final investment decision, expected by the end of the year. Glenfarne will fund the work
AGDC remains 25% owner of 8 Star Alaska.
The project includes the 807-mile 42-inch pipeline, the 20 million tonne per annum liquefied natural gas facility and export terminal in Nikiski and the North Slope-based carbon capture plant.
To date the state has invested some $1.1 billion in various plans to move North Slope natural gas. Glenfarne will pay the state's share of remaining work through to a final investment decision but wanted a backstop for the up to $50 million estimated to get to final investment decision on the phase one pipeline -- covering Glenfarne's costs if it determines not to go ahead with a final investment decision.
The Alaska Industrial Development and Export Authority board agreed to provide that backstop. Initially the $50 million was included in the budget, but when this drew objections, AIDEA Executive Director Randy Ruaro told legislators the agency determined it could issue a corporate guarantee whereby funds to meet the up to $50 million were held within the agency backed by its own assets, eliminating the need for the $50 appropriation.
Pipeline first The plan is to phase the project, starting with the pipeline -- but only from the North Slope to a connecting point with Enstar's natural gas pipeline system on the west side of Cook Inlet.
"In light of steadily declining gas production from Cook Inlet, which has historically been Alaska's primary in-state natural gas basin, phase one of the project will kick off immediately, prioritizing the development and final investment decision of the pipeline infrastructure needed to deliver North Slope gas to Alaskans as rapidly as possible," the companies said.
Following a successful final investment decision, the state retains a 25% stake in 8 Star Alaska and can invest up to 25% in any of the three 8 Star Alaska subprojects -- the conditioning plant, the pipeline and the LNG facility.
In the March 27 statement on the agreement, Alaska Gov. Mike Dunleavy called it "a historic day" noting the Prudhoe Bay oil was discovered some 57 years ago "and since then Alaskans have never given up on finding a way to also benefit from our North Slope natural gas." To date, he said, the state "has made a significant investment to develop Alaska LNG to the point where we can engage Glenfarne, a well-qualified industry header, to bring this great project to the finish line."
AGDC President Frank Richards praised the work of the team at AGDC over the last 11 years and said he looked "forward to working with Glenfarne as they lead Alaska LNG forward."
Glenfarne "Glenfarne's financial, project management, and commercial expertise is well matched to lead this vital project forward," Brendan Duval, Glenfarne chief executive officer and founder, said in the March 27 statement. "Alaska LNG will provide desperately needed energy security and natural gas cost savings for Alaskans and give Glenfarne unmatched flexibility to simultaneously serve LNG markets in both Asia and Europe through our three LNG projects. Glenfarne strongly believes in the benefit of partnering with the communities where we work, and we are already building our Alaska team to bring Alaska LNG to life."
Glenfarne's other LNG projects are in the Lower 48. Neither is in production. Texas LNG, which recently announced its capacity is fully sold out with a final investment decision expected later this year. Magnolia LNG, a late-stage LNG export project in Lake Charles, Louisiana, is owned by a Glenfarne affiliate which is the largest importer of LNG into Colombia.
AGDC In a March 27 update to the AGDC board, Richards noted that Taiwan's state-owned energy company, CPC Corp., signed a non-binding letter of intent March 20, expressing an interest in an offtake of 6 million tonnes per annum for 20 years and the potential of an equity investment.
Bills have been introduced in the Legislature requiring a direct spur line to Fairbanks and establishing the Alaska Gasline Finance Corp. which would offer shares to the public and have primary responsibility for financing a natural gas pipeline in the state. Richards said the finance corporation proposal, Senate Bill 125, directly conflicts with AGDC's statutory power and duties.
On the Fairbanks spur line bills, House Bill 199 and SB 114, Richards said AGDC designed and permitted a Fairbanks spur under ASAP, and said AGDC has a preliminary agreement with a qualified Fairbanks company to fund, construct and operate a Fairbanks spur line. That company has requested confidentiality, but AGDC will share completed permit and design work for ASAP with that entity, minimizing cost and schedule. That line would start up simultaneously with the main line, he said.
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