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Yukon Pacific: Sinopec would be anchor tenant Little Susitna Construction, Yukon Pacific and the Sinopec connection could be marriage of market and LNG project permits By Kristen Nelson Petroleum News
Although it may not be a complete proposal under AGIA, Wayne Lewis says the Little Susitna Construction Co.-Sinopec Alaska Gasline Inducement Act application is a proposal with muscle behind it.
Think of a liquefied natural gas project as a regional mall, Lewis told Senate Resources Feb. 4, joining Dominic Lee, president and CEO of LSCC, in a presentation.
“You just landed Nordstrom,” Lewis said, referring to Sinopec, which under the LSCC application would have purchased 4 billion cubic feet of natural gas a day at the wellhead for shipment to Valdez and processing at an LNG plant. The LNG would have gone to China on Sinopec-supplied LNG tankers.
The state rejected the LSCC application, saying it required a post-AGIA contract to be negotiated between the state and LSCC — a contract which required final approval from the People’s Republic of China.
Lewis worked with Jeff Lowenfels at Yukon Pacific for many years on a project to move North Slope natural gas to the Far East as LNG from a facility to be built at Anderson Bay near Valdez. Yukon Pacific assembled permits, authorizations and rights of way for the project — and had preliminary interest from potential LNG buyers in the Far East — but couldn’t get agreement from North Slope oil producers to sell gas and thus was never able to formalize a contract to sell LNG.
Lee told legislators the LSCC-Sinopec plan would provide maximum return to the state and to the North Slope Producers because the LNG would be purchased at Far East prices, higher than the price shippers would receive from selling pipeline gas in the Lower 48. And over the life of the project the sale of LNG to China would have a substantial favorable impact on the U.S. trade deficit, Lee said.
The LSCC project also proposed to provide energy to Alaska through a spur line to the Beluga field in Southcentral, probably built by the Alaska Natural Gas Development Authority, which proposed such a spur line in its own AGIA application. Propane, extracted at Valdez, would be shipped to Seward and then north by rail for use in Interior communities. In addition to the LNG shipped to China, LNG would also be shipped to Southeast Alaska.
And pentane, a liquid from gas that Lee called a natural gasoline, would be given to gasoline stations to sell at cost, 30 cents a gallon, he said.
Yukon Pacific connection new Lewis said he and Lowenfels were volunteering their time and hadn’t known about the LSCC proposal until the AGIA applicants were announced.
“This is one of the most astonishing things I have ever heard of — after all, an entrepreneurial individual citizen has brought in at least a serious overture,” Lewis said. “… It really is astonishing; (it) deserves a lot of attention because of the weight of this buyer.”
Lewis said with Sinopec as a buyer, the project is financeable “and it doesn’t require any federal help; it doesn’t require any state help: It’s a standalone deal.”
He and Lowenfels are interested in the LSCC project, he said, “because we can see instantly the synergies between all of the work already in place by Yukon Pacific,” which has permits, authorizations and rights of way for a pipeline to take natural gas to a liquefaction facility at Valdez.
“There’s been no marriage yet between this proposal (LSCC) and the holders of those permits, but it’s so logical because after all, the permits have no value without a project,” Lewis said. The permits — on which the Alaska Gasline Port Authority holds an option — are owned by Yukon Pacific parent CSX Corp.
He said LNG was a “tortured fit” for AGIA because AGIA wasn’t really written for an LNG project.
Asked by Senate Resources Chair Charlie Huggins, R-Wasilla, what changes to AGIA Lewis would suggest, should AGIA amendments be proposed, Lewis said the open season comes to mind. The AGIA process “seems to contemplate a standard pipeline transmission system which charges a tariff for shippers,” he said.
“If you buy 4 billion, 2 billion (bcf per day), whatever you buy at the wellhead — you’re your own shipper. You own the project.” Tariffs don’t work for an LNG project, he said, “because at the end of the pipeline is an LNG plant, not a market.”
But with an LNG project, Lewis said, “what you have in the strength of a Sinopec, is that anchor tenant we’ve never really had for an LNG project — for any kind of a project.”
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