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In-state gas line from North Slope on table North Slope to Valdez infrastructure would cost under $10B, plus $500M for Glenn spur from Glennallen to Beluga, says Heyworth By Mary Odden Copper River Record
A letter sent from Alaska House Speaker John Harris to Gov. Sarah Palin earlier in February indicates that legislators are turning their attention to the merits of an in-state gas pipeline, while intensively examining all the various North Slope gas pipeline proposals brought forward since November — inside and outside of the official AGIA (Alaska Gasline Inducement Act) process.
Harris’ Feb. 12 letter to Palin states that a presentation to the House Majority Caucus from AGIA-compliant TransCanada, with its proposal for an Alaska Highway line, has made it clear that “North Slope natural gas will not be a source of energy for Alaskans for a minimum of 10 years.” The letter attests, “It is imperative that the state make the initial steps to advance an in-state natural gas pipeline.”
The letter was a part of heightened communications between legislators, industry heads, and the governor’s oil and gas team. It followed the announcement of an agreement between ExxonMobil and Fairbanks Natural Gas Co. of the sale of a small amount of North Slope gas for truck delivery to Fairbanks as liquefied natural gas. And it followed presentations to the Legislature by TransCanada, the Alaska Gasline Port Authority and Little Susitna Construction Co.
Two legislative presentations by the Port Authority on Feb. 11 drew dramatic contrasts between the difficulties facing a highway line mega-project through Canada and the advantages of a smaller instate project.
ANGDA efforts Any sea change towards an in-state project focuses attention on the on-going efforts of the Alaska Natural Gas Development Authority, a public corporation of the State of Alaska created by voters in 2002, to forward an all-Alaska project for liquefied natural gas. Since 2004, ANGDA has been pursuing rights of way and environmental studies on a 24-inch natural gas spur line between Delta Junction and Cook Inlet. Conditional rights of way are in place for this spur line route.
Board Chairman Scott Heyworth says ANGDA has been “stickin’ to its knittin’” as CEO Harold Heinze calls it, and quietly doing the work necessary to make the spur line economics and efficiencies pencil out.
He added that “any inclusion of the gas liquids coming down the spur line to some location either in Kenai, Mat-Su or Valdez could greatly enhance the economics and potentially lead to new in-state value added industries using butane, ethane, and the propane for example.” ANGDA is preparing a study on these gas liquids and their values. One scenario could envision a liquids “fractionation plant” near Glennallen.
ANGDA is scheduled present its spur line progress off of any “big” gas project to the House Majority Caucus Feb. 21. Direct line from North Slope And in light of intensified interest in an in-state project, it will also outline the possibility of an 800 mile direct line — including “upstream” gas supply and conditioning options, “midstream” pipeline construction options, and “downstream” marketing of natural gas, gas liquids and LNG.
House Speaker John Harris, R-Valdez, made this request to Heinze.
Heyworth says market research by ANGDA indicates that Alaska utilities and industries, aggregated in a bundle, could subscribe for about 250 million cubic feet per day of natural gas or more in an open season, while LNG customers (Sempra, Mitsubishi, Sinopec, BG Group, among others) have expressed preliminary interest in a commercial quantity of the LNG export product, making “direct line” smaller project economics look viable — based on just preliminary rough calculations at today’s current gas prices.
These preliminary numbers, says Heyworth, appear to translate into an economically viable North Slope pipeline/spur line-to-Southcentral project (using 24-30 inch diameter pipe), financed privately and possibly also employing ANGDA’s bonding authority. This amount of gas, he says, could be supplied in a number of ways — by the state’s royalty gas plus Point Thomson, royalty gas plus new found discoveries (drilling is proceeding in the Foothills this winter), or royalty gas and a commitment of gas from one or even two of the “big three” leaseholders.
Less than $10 billion At $5 billion for the pipe and compressors, $3 billion for the liquefaction plant in Valdez and another $1 billion for docks and storage tanks, the North Slope to Valdez infrastructure weighs in at less than $10 billion, with another $500 million to run the Glenn Highway spur line the 180 miles from Glennallen to Beluga. Depending on the volume subscribed to at open season, a gas conditioning plant at the North Slope may or may not be needed, according to Heyworth.
The project work would be done by the private sector.
Heyworth says he is pleased that attention may now also be focused on ANGDA’s contingency “plan B” for getting North Slope gas to Alaskans, and also to dispel some of the misunderstandings which have always dogged the effort to initiate an all-Alaska gas line. He furthered noted that Palin had requested ANGDA to revisit this option more than a year ago. Exporting gas “Existing tankers could be re-flagged to take Alaska gas to U.S. ports and not violate the Jones Act,” says Heyworth. “The (Alaska Gasline) Port Authority has done extensive work on this option. Another option came to light from Sinopec, a Chinese consortium, who offered to build four new Jones Act compliant LNG tankers in their ‘non-compliant’ AGIA application to the state, for a LNG project.
“That is some offer,” Heyworth noted, “that underlines the viability of an in-state LNG project of some size in the eyes of other big LNG companies.
“And if you sell to Asia in their much higher priced LNG markets — most recently at a record high $20 per mmbtu (million Btu, roughly equivalent to 1,000 cubic feet), instead of at Henry Hub rates of $8.50 mmbtu (the Feb. 15 price), then you open up all the possibilities of trading other foreign LNG products back into the U.S. markets from the Far-East, Indonesia, Australia or even Russia.”
ANGDA has also been developing plans for the production and distribution of propane to Alaska communities who would not have direct access to a natural gas pipeline, but could be served by air transportation, barge, rail, ship or truck. A pilot propane project initiated by ANGDA is currently being pursued in the village of Tanana.
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