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AGDC aims at consortium Two-phase investment offering, equity for funding, looking at multiple investors
Kristen Nelson Petroleum News
The Alaska Gasline Development Corp. is working to secure financing for the Alaska LNG Project, while also positioning the project to better fit a world where reduction of carbon is a goal.
The project is aimed at commercializing North Slope natural gas by moving it to tidewater on Cook Inlet and liquefying the gas for shipment as LNG - while also providing natural gas for in-state use by Alaskans.
AGDC is proposing a hydrogen project at the Cook Inlet, using ANS natural gas to produce hydrogen and sequester carbon from the project in Cook Inlet reservoirs.
Further emphasizing the benefits of the project, the gas treatment plant on the North Slope has been renamed the Arctic Carbon Capture Plant. CO2 from the plant would be captured and permanently sequestered in geologic zones on the North Slope.
In a Dec. 1 presentation to the board, AGDC President Frank Richards said the plant will be one of the largest such plants in the world, removing carbon dioxide and hydrogen sulfide from natural gas prior to shipment of that gas south on the proposed 807-mile pipeline.
Search for funds AGDC is an independent public corporation of the state of Alaska, but hasn’t had state funding since 2016, Richards said, and is currently pursuing multiple strategies to raise development capital.
He said various sources of funding are being pursued, including established LNG developers, although there are a limited number of such developers and each has competing opportunities.
Strategic investors are another option. These investors have other interests in Alaska LNG, such as offtake or participation in other aspects of the project.
Some financial investors have an interest in LNG projects and in standing up project management teams for execution.
Richards said these options can be complimentary and are not mutually exclusive.
He said AGDC is pursuing a possible consortium with multiple investors.
Project equity would be through 8 Star Alaska.
Two-phase offering Richards said AGDC’s investment offering is in two phases, the first of which would fund 8 Star Alaska and would also include in-kind funding of project work. The scope of phase 1 is commercial and technical front-end engineering design prep, including FEED level agreements, LNG sales and preparation of FEED contracts.
The consideration in phase 1 is a minority equity stake in 8 Star Alaska, for the LNG facility only.
Phase 2 would include funding of 8 Star Alaska plus FEED costs. The scope would include FEED, definitive commercial agreements and financing.
The consideration in phase 2 is a majority equity in 8 Star Alaska for the LNG facility only.
Richards said the equity stake differentiates Alaska LNG from other such investment opportunities, as the majority equity stake would be in exchange for funding all development costs and progressing development on an AGDC-approved timeline.
He said competing projects try to trade as little equity/control as possible for development capital.
One important thing potential investors want to see is commitment from the LNG market prior to investment. Richards said that in addition to seeing investors, AGDC is marketing LNG to buyers, offering fixed prices, Henry Hub linked and Brent linked.
AGDC has refreshed its confidential information memorandum for potential investors in the LNG facility. The last version largely focused on existing LNG developers, but this version has a broader financial investment as its target.
Alaska hydrogen AGDC submitted the Alaska H2Hub concept paper to the U.S. Department of Energy Nov. 4. The 2021 Infrastructure Investment and Jobs Act includes funding for six to 10 regional clean hydrogen hubs and a DOE regional hydrogen hub award to Alaska could provide as much as $1 billion in direct matching grants for hydrogen hub infrastructure planning, design and construction, Richards told the board.
He said the Alaska H2Hub concept would be commercial-scale, low-carbon intensity hydrogen - ammonia - for domestic use and for export to Asia. The project would use $850 million in DOE funding along with $3.75 billion in private-sector funds.
If Alaska’s proposal receives encouraging notification from DOE a full application would be submitted in April.
Liquid ammonia would be the primary Alaska H2Hub product, and the existing Nutrien Kenai Plant ammonia facility would be restarted, with initial production of 3,500 tonnes per day of liquid ammonia and future expansion increasing production to 8,900 tonnes per day.
A Cook Inlet carbon capture and sequestration facility would be developed to gather and sequester some 4,300 tonnes per day of process carbon dioxide from the plant.
The Alaska Department of Natural Resources has identified the Cook Inlet basin as having the highest carbon dioxide storage potential in Alaska, an estimated 50 GT, gross tonnage, in depleted reservoirs, saline aquifers and coal beds. Carbon dioxide from the Kenai plant would be sequestered in one or more of two target CO2 sequestration fields in Cook Inlet, including Middle Ground Shoal field and the Kenai gas field.
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