|
AIDEA commits to $50 million to backstop Alaska LNG project
Kristen Nelson Petroleum News
The board of the Alaska Industrial Development and Export Authority passed a resolution Dec. 4 authorizing negotiation and signing a $50 million letter of credit to backstop remaining front-end engineering and design costs for phase 1 of the Alaska LNG project being promoted by the Alaska Gasline Development Cost.
AGDC President Frank Richards told a meeting of the Alaska House Resources Committee Nov. 19 that it needed up to $50 million to backstop FEED costs. He said AGDC was working with a pipeline operator to take on and execute FEED, but that company needed assurance it would be repaid for costs up to $50 million if the project doesn't go forward.
The current work is for phase 1 -- the pipeline from the North Slope to the west side of Cook Inlet where natural gas would go into an Enstar pipeline for use by utilities, supplementing declining supplies of Southcentral natural gas for use in heating and electricity generation. Phase 1 would use natural gas from Great Bear Pantheon, from sources south of Prudhoe Bay along the Dalton Highway, avoiding the costs which would be needed to purify natural gas from Prudhoe Bay and Point Thomson.
The complete project, which would produce LNG for sale and shipment abroad, would require gas separation facilities at Prudhoe, an extension of the pipeline under Cook Inlet to Nikiski and construction of the liquefied natural gas plant required to produce LNG.
Richards told legislators that having the pipeline in place reduces the project risk in the eyes of potential investors in the larger project, which would liquefy the gas for sale in Asia as well as providing volumes for use within the state.
AGDC In a statement issued after AIDEA approved the resolution, AGDC said the letter of credit would allow it "to unlock up to $50 million in private investment needed to move the Alaska LNG pipeline through FEED, the remaining development stage that must be completed before a final investment decision can be made." AGDC said it was "in advanced discussions with potential project partners to privately fund and complete FEED and will announce updates when new developments occur."
The corporation said the letter of credit from AIDEA would "only be utilized if a final investment decision is not reached, at which time AGDC will own the completed pipeline engineering and design work."
AIDEA In its resolution, AIDEA noted that the state "has spent hundreds of millions of dollars concerning a pipeline to monetize" North Slope natural gas, that Cook Inlet supply is uncertain with some utilities evaluating alternative gas sources and said AGDC has been working with utilities on delivery options to bring North Slope gas to Southcentral.
AIDEA said AGDC has informed its board that FEED work largely involves "updating final cost estimates, construction contracts and other work estimated to cost up to $50.0 million."
AIDEA also noted that the project is eligible for a loan guarantee of $28 billion from the U.S. Department of Energy guaranteeing "the full faith and credit of the United States pursuant to the 2021 Infrastructure Investment and Jobs Act."
The resolution authorizes AIDEA's executive director and staff "to proceed with the evaluation of funding, (which may include a third-party source of capital) for the Front End Engineering and Design study" of phase 1 of the Alaska LNG Project and authorizes negotiating of a memorandum of understanding with AGDC for a backstop not to exceed $50 million.
| 