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ANS LNG project group approves stage two Focus now commercial, project approved for 12-15 months with budget of $3 million; stage one was technical, downsizing project to 7 million tons Kristen Nelson PNA News Editor
The Alaska North Slope LNG project sponsors said Aug. 7 that they have agreed to continue efforts to develop an economically viable liquefied natural gas export project in Alaska. The sponsors said stage one studies, begun in late 1998, have been successfully completed.
Steve Alleman, Alaska North Slope LNG project manager, told PNA Aug. 7 that stage one produced a “market viable” project with significantly reduced financial and market-viable risk.
Phillips Alaska Inc., BP Exploration (Alaska) Inc., Foothills Pipe Line Ltd. and Marubeni Corp. will continue as project sponsors, and the group’s primary focus will continue to be LNG with a gas pipeline route and LNG plant site configuration for either Anderson Bay near Valdez or Nikiski, the sponsors said.
During stage one project sponsors identified a 7 million tons-per-year project as the most feasible option with an estimated $7 billion capital cost, including shipping.
Stage two has a budget of about $3 million, Alleman said, compared to $12 million to $15 million for stage one, which was technically oriented, with a good deal of work contracted out.
“This stage will be very commercially focused,” Alleman said. “It’s not just economics, it’s competing with other projects,” he said. The sponsors “have to know what the risk looks like” and get the financial markets “to accept the fact that we are a competitive project.” Stage one, he said, “produced a market viable project with significantly reduced financial and market-viable risk” and in stage two the sponsors will continue to look for ways to further reduce costs and risks.
Hajime Kubo, senior officer in the energy division at Marubeni, said in the sponsor’s statement that “stage one reinforced our belief that an LNG project serving East Asia will be market driven. So the objective of the sponsor group is to pace the project to be ready when the market is ready.” Cost, risk reductions stage two goals “Further reductions in cost and risk, differential to our competitors, are still needed to make an Alaskan project economically viable,” said Kevin Meyers, president of Phillips Alaska in the sponsors’ Aug. 7 statement. “We believe the opportunities for those improvements lie in commercial areas, such as marketing, financing, government fiscal and regulatory policy, and possible synergies with other gas commercialization options such as pipeline gas to the Lower 48 or gas-to-liquids.”
Alleman said cost sharing could include gas pipelines to the Lower 48, GTL, even a public entity or port authority, “anything that will add value to this project or allow us to share costs at the end of the day.”
“We will stay very open and very flexible on that,” he said.
Alleman said a destination decision — Anderson Bay or Nikiski — wasn’t part of stage two. The focus, he said, will be on improving competitiveness.
The effort will continue to be lead by Phillips out of the company’s Anchorage office complex with work by staff from sponsor companies and contractors. Stage one reduced project size John Ellwood, vice president of engineering and operations for Foothills, said in the Aug. 7 statement that the sponsors “feel good about the current technical design and cost estimate of our project.
“By cutting the project size by about half and by designing in capital cost deferrals during the stage one effort, we think we have a project that is small enough to gain a toehold in the East Asian marketplace and yet large enough to make economic sense. Such a project would also be expandable.”
Alleman described stage one results to the Alaska Support Industry Alliance last September. The 7 million ton project, he said, is about half the size of the 14.7 ton project studied earlier, and “puts this project right in line with other green-field projects across the world.” Alleman said the pipeline would probably still be 28 inches to 30 inches in diameter, but that only one LNG train would be required and the conditioning plant on the North Slope would be smaller. This market-entry project could be expanded if market conditions warrant, he said.
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