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Legislators hear AK LNG update; Senate: October special session
At the beginning of a session expected to include a lot of focus on North Slope natural gas projects, Alaska legislators got updates on the status of the Alaska LNG project and the Alaska Gasline Development Corp.’s work on both Alaska LNG and the Alaska Stand Alone Pipeline.
Alaska LNG would liquefy North Slope gas for export, as well as serving in-state needs, while ASAP - currently on hold pending a decision to move forward with Alaska LNG - would focus on in-state markets.
Looking forward to legislative action required to move Alaska LNG along, members of the Senate majority said Feb. 2 that they are setting aside October for a special session.
Alaska LNG, a partnership between BP, ConocoPhillips, ExxonMobil and the state of Alaska, is in the pre-front-end engineering and design phase, with a decision on whether to proceed to FEED slated for early 2016, and legislative approval required for agreements prior to a decision to move to the FEED phase.
Benchmarks being met Steve Butt of ExxonMobil, senior project manager for Alaska LNG, told the House and Senate Resources committees Jan. 30 that the integrated project team is meeting benchmarks.
Ownership in the project is based on natural gas, with the state at 25 percent through a combination of royalty and its plan to take production tax in gas. AGDC represents the state for the liquefaction facility; TransCanada represents the state for the North Slope gas treatment plant and the pipeline.
Butt said the project has received export authorization from the Department of Energy for Free Trade Agreement countries and is working on export authorization for non-FTA nations. The export authorization the project is seeking for non-FTA nations would be larger than anything received to date, he said.
Competitive issues Butt said there are some two molecules of gas under development for every molecule of forecast demand over the next 20 years, which means half of those molecules won’t get to market.
To be successful the partners will need to work together to keep costs down, he said.
Previous Alaska projects have been focused on the pipeline, Butt said, whereas Alaska LNG is an integrated project, which means work is done under Section 3 at the Federal Energy Regulatory Commission, rather than under Section 7. Under Section 7, pipeline developers weren’t allowed to talk to the upstream and there were restrictions on data that could be shared.
Under Section 3, for an integrated project, there are no such restrictions, allowing the project developers to share data with Prudhoe Bay and Point Thomson field operators, he said, providing the project access to information not available to previous pipeline projects.
Removing uncertainties Everything in the pre-FEED and FEED phases is about reducing uncertainties, reducing risk, Butt said, making the partners comfortable with putting more and more money into the project. During the concept phase the spend was $3 million to $4 million a month, he said. In pre-FEED the spend has increased to some $25 million a month and would increase to more than $100 million a month in the FEED stage, a combined cost of more than $2 billion before the final investment decision is made.
Butt said the technical work is going very well, but both commercial and regulatory issues are challenging.
The team working the technical issues is functioning very well, he said, adding that owner issues are where there are differences of opinion, including the state. Mechanisms are in place to get to agreement, he said.
AGDC The Senate Finance Committee received an AGDC update Jan. 30.
Frank Richards, AGDC vice president of engineering and program management, said ASAP is now aligned with the next milestone in Alaska LNG, the FEED decision, so ASAP’s overall schedule - if it goes ahead - would be more in line with the 2024-25 Alaska LNG project for actually delivering gas.
If Alaska LNG advances into FEED in the first quarter of 2016, AGDC’s focus will be on that project. If Alaska LNG doesn’t advance into FEED, Richards said, ASAP is backup.
Fritz Krusen, AGDC vice president of Alaska LNG, said a difference between ASAP and Alaska LNG is that LNG requires removal of CO2 to a higher criteria. Home heating systems can burn up to 3 percent CO2, he said, but that volume of CO2 in an LNG facility would freeze up and close down the plant. Gas coming down the pipeline in an ASAP project would be a little richer, Krusen said.
Richards said the volume of natural gas for ASAP remains at 500 million cubic feet per day since commercial interest won’t be known until that project has meaningful discussions, now on hold. If Alaska LNG doesn’t proceed, he said, ASAP would look to the market and could add volume with additional compression stations and perhaps a redesign of the gas treatment plant. He said if the volume of an ASAP project grew to 800 million cubic feet, for example, the GTP would be redesigned and compressor stations added. Commercial discussions, potential redesign and the environmental permitting process are all built into the schedule, should ASAP go forward.
- Kristen Nelson
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