The Alaska Gasline Port Authority said this afternoon that it has submitted an offer to the state of Alaska and companies holding gas reserves around Prudhoe Bay (ExxonMobil, ConocoPhillips, British Petroleum, ChevronTexaco and Forest Oil) to purchase an initial quantity of some 4 billion cubic feet a day of wellhead gas on the North Slope for 30 years.
The port authority’s board chairman, Mayor Jim Whitaker of the Fairbanks North Star Borough, called it “an historic event” that for the first time an offer has been made to purchase Alaska North Slope natural gas.
At a base case where the gas price is $4.50 per million British thermal units and $23.97 per barrel for liquefied petroleum gas, and at 2005 material and construction costs, the estimated netback would be $1.02 per million Btu at the entrance to the conditioning plant, the authority said in its offer.
The gas would be for delivery to consumers in Alaska and on the West Coast.
The port authority said gas sale revenues are estimated to be in the range of $1 billion to $2 billion-plus annually.
The port authority is also structured to share project revenue with Alaska communities and with the state, and estimates a base case of $370 million a year distributed 60 percent to the state, 30 percent to municipalities and 10 percent to offset the cost of energy to non-pipeline communities.
In late 2004 the port authority signed a development agreement with Sempra LNG for services in developing and constructing an all-Alaska project, and marketing liquefied natural gas and natural gas liquids.
The port authority also has an exclusive option to buy Yukon Pacific Corp., including all of its permits and rights of way. In March the port authority signed a memorandum of understanding with the Marine Engineers Beneficial Association and a Sempra Energy subsidiary regarding the Jones Act.
The port authority has estimated construction costs for an all-Alaska project at $16.1 billion including the pipeline, three compressor stations, a gas conditioning plant at Prudhoe Bay and a liquefaction and NGL separation plant at Valdez.
The port authority said its “offer is a standard netback arrangement” in which the state and the producers will be paid “the gas sale price less the costs of delivering the gas to market.”
Editor’s note: See full story in April 10 issue of Petroleum News.