January 05, 2012 --- Vol. 18, No. 2January 2012

Much ado about LNG, Point Thomson at Jan. 5 meeting, reception with state, BP, Conoco, Exxon chiefs

Amid rumors of a major announcement from Alaska’s big three North Slope gas owners, ExxonMobil, BP and ConocoPhillips, involving a change in direction for TransCanada’s Alaska Pipeline Project that would take the line to tidewater for liquefied natural gas export to Asia, versus going through Canada to U.S. markets, the movers and shakers in Alaska’s oil and gas industry received invitations on Jan. 3 from those companies to a private noon luncheon on Jan. 5 with their chief executive officers — Rex Tillerson, ExxonMobil, Bob Dudley, BP, and Jim Mulva, ConocoPhillips.

Although there was no alignment on LNG announced at the event, it was the first time since the passage of the Alaska Gasline Inducement Act that the three gas owners publicly admitted they were taking a close look at moving North Slope gas to tidewater in Southcentral Alaska for export as LNG to Asia.

Plus, a PN source said there was “significant progress” made on the Point Thomson settlement in the private meeting held before the luncheon, a meeting that included only Alaska Gov. Sean Parnell, Tillerson, Dudley and Mulva.

After the 1 hour and 40 minute meeting between the four chief executives, their staffs were invited into the room, including Alaska senior management for the oil companies and state commissioners and directors.

The four chief executives immediately explained the results of their meeting to their staffs so that there would be no misunderstandings.

The three oil company CEOs were in Alaska at the invitation of Parnell, who gave the first speech at the reception, followed by Mulva, Dudley and Tillerson. The topic: Southcentral LNG project.

There was no major announcement.

In a nutshell, the governor said the three companies had reported progress in discussing alignment on an instate route for the gas pipeline that would take the gas to tidewater in Southcentral Alaska where it would be liquefied for export by tanker.

He, Dudley and Tillerson also said TransCanada was involved in the discussions; and he told the three oil company CEOs that the state needs “metrics for progress.”

The governor also talked about the state tax changes that would be needed.

Mulva, too, mentioned Alaska’s production taxes, saying they were too high and unpredictable.

Progress has been made in the LNG discussion, he said, describing the meeting with the governor that morning as a key event for Alaska.

But, Mulva said, much more needs to be discussed.

Dudley acknowledged that there is a market for Alaska LNG in the Pacific Rim; a market, he said, that needs to be evaluated.

Tillerson, the most upbeat of the three CEOs, said ExxonMobil has done similar projects elsewhere in the world and was ready to do it in Alaska if “we can find the right alignment.”

“We succeed together or we fail together,” he said of the state and the industry.

He also said ExxonMobil is willing to accept the market risk, which is a risk that can’t be controlled.

All three company CEOs praised Parnell and his administration at the luncheon, which was hosted by Lynden with company executive Jim Jansen the master of ceremonies.

“I have looked the governor in the eye and I know he is earnest about wanting to be a partner” with industry in Alaska, Tillerson said. “I trust him.”

—Kay Cashman

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