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July 05, 2011 --- Vol. 17, No. 61July 2011

AGDC study finds Alaska in-state gas line viable

Dan Fauske, president of the Alaska Gasline Development Corp., today presented to Alaska legislators the much anticipated AGDC report on the practicalities of building an in-state pipeline for delivering natural gas from the North Slope to Fairbanks, Southcentral Alaska and other Alaska communities.

The in-state line is one potential option for dealing with pending gas shortages in Southcentral Alaska, as well as delivering gas to places such as Fairbanks.

AGDC has found that, using a reasonable set of economic assumptions, the in-state line and an associated gas treatment plant could be built for about $7.52 billion, enabling North Slope gas to be delivered to Anchorage at a cost of about $9.63 per million British thermal units, and to Fairbanks at $10.45 per million Btu, Fauske said. Those costs compare favorably with alternatives such as the import of liquefied natural gas into Southcentral Alaska and would likely make the in-state line commercially viable, he said.

However, AGDC projects a completion date for the line in 2018, with first gas through the line in 2019, a timeframe that could leave Southcentral Alaska short of utility gas between 2014 and 2019, based on current utility projections of established gas supplies.

Fauske told legislators that estimates for the project economics had turned out much better than he had anticipated prior to the start of the AGDC gasline study.

The apparent viability of the line results from the economics of optimizing the line design for a capacity of 500 million cubic feet per day, coupled with strong interest by potential industrial gas users to make maximum use of that capacity by filling any capacity not required by Alaska utilities, Fauske told Petroleum News.

Fauske said that the most likely industrial use for gas carried through the line would be liquefied natural gas production, but he declined to comment on who the potential industrial customers for the line might be.

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