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Yukon Pacific’s Jeff Lowenfels challenges assertion that Lower 48 gasline best for Alaska State’s position begins with premise there is no Far East market for Alaska LNG; Yukon Pacific says market there, LNG project better for Alaska Kristen Nelson PNA News Editor
A liquefied natural gas project would provide more jobs for Alaskans and Alaska contractors, more natural gas for instate use and more revenue to the state than a gas pipeline to the Lower 48, Yukon Pacific Corp. President Jeff Lowenfels told the Alaska Support Industry Alliance Jan. 4.
And, Lowenfels said, the Alaska Highway route, selected by the Knowles administration as the state’s preferred route for commercializing North Slope gas, doesn’t do the things the governor said he wanted to do: maximize jobs for Alaskans, instate use of gas and revenue to the state.
The Yukon Pacific project, Lowenfels said, is the one that delivers maximum benefits to the state. Benefits to Alaskans On the issue of jobs for Alaskans, he said, 100 percent of the jobs to build the Yukon Pacific project will be instate because 100 percent of the project is instate. Only 33 percent of a pipeline to the Lower 48 would be built in the state.
“We have a project labor agreement,” he said. “They don’t have a project labor agreement and they’ve got to deal with Canadian labor as well as U.S. labor.”
For contractors, Yukon Pacific “is going to use Alaskan contractors to the max. Because that’s the way we do things here in Alaska.
“And that’s the way they do things in Canada — they use Canadian contractors to the max. And anybody,” he said, “who thinks this isn’t going to work that way, isn’t paying attention.”
The Yukon Pacific project will deliver gas to three out of four Alaskans — those who now depend on Cook Inlet natural gas. “The Alcan project will deliver gas to 15 percent of Alaskans — to Fairbanks, which doesn’t have gas, is not relying on gas right now.”
And gas to Cook Inlet is important, he said, because “we’re running out of Cook Inlet natural gas.”
“There’s probably enough gas to get us through 2009” without major problems, he said. “But after 2009, we’re in big trouble,” Lowenfels said, referring to an Institute of Social and Economic Research study done on Cook Inlet gas supplies.
We can bring gas in from Indonesia as LNG, he said. “Or we built a pipeline down from the North Slope to Valdez… And we build a 140-mile spur line from Glennallen into the Wasilla-Sutton area and we hook up into the Southcentral system and we bring North Slope gas here.”
Lowenfels said the state would also get more revenue from an instate LNG project: Yukon Pacific has calculated, based on differences in transportation costs and the cost of capital, that the state of Alaska would get 58 cents in revenue from the Yukon Pacific project compared to 22 cents from an Alaska Highway project. Market exists in East Asia, Mexico Addressing the market issue — sometimes cited as a problem for Yukon Pacific’s proposal to ship LNG to East Asia — Lowenfels said the East Asian market is there for Alaska LNG.
“There’s no question that the market exists. There are some 14 or 15 competing projects trying to get into that marketplace,” he said. The countries Yukon Pacific is talking with, Japan, Korea and Taiwan, would like to buy from the United States to spread their sources of energy and to have a source from a stable area, he said. And because LNG is sold on long-term contracts with the price pegged to a market basket of world oil prices, LNG sales aren’t affected by short-term price fluctuations.
There also appears to be a market for Alaska LNG at high prices in Mexico, Lowenfels said, because in Mexico the competition is fuel oil. Project size Another problem which has been cited for the Yukon Pacific project is its size and the portion of the East Asian market it would have to grab to succeed.
The LNG project is big, Lowenfels said, but “all LNG projects are big. That’s the nature of LNG.” The Yukon Pacific project would be grabbing about five years of market growth. That, he said, is what happens with LNG and the long-term projects.
“One project goes in at a time. It goes in. It grabs its share. Then expansion economics take effect and people buy more from it. And then another one comes in and does the same thing.”
The proposal to build a pipeline to the Lower 48, especially at the 4 billion cubic feet being discussed, would take “over 100 percent of all U.S. demand growth from 2007 to 2009,” he said. “So anybody who makes discoveries elsewhere, forget it. Canadians, forget it. Gulf of Mexico, forget it. Rockies, forget it.” That 4 billion cubic foot project is equal, Lowenfels said, to 10 years of Canadian import growth. Cheaper gas closer to Lower 48 The distance between Alaska North Slope natural gas and tidewater has also been cited as a problem for the Yukon Pacific project because of the cost of building an 800-mile pipeline to get the gas to tidewater and because there is gas available for the Far East at or closer to tidewater, making it cheaper.
That argument, Lowenfels said, applies equally to proposals to build a pipeline from the North Slope and ship Alaska gas south.
“You know the rap we used to get from people all the time was, ‘you’ve got a great project Lowenfels, but you know what? In Asia there is plenty of gas, closer to the markets you want to serve, that doesn’t require a long pipeline.’ “
“And that’s the situation in the Lower 48 states,” Lowenfels said.
“People in Chicago aren’t stupid,” he said. “They don’t want to pay high prices for long periods of time, locked in long-term — because that’s what you’d require in order to finance the project — when they can buy gas cheaper elsewhere.” Infrastructure now exists in the Lower 48, he said, so that gas can be readily transported. “If you live in Connecticut, you can buy your gas from a utility in Houston, or you can buy your gas from the Canadians… And they’re always going to go for the cheaper gas, and our gas in Alaska is not going to be cheap. There’s lots of gas, closer,” he said, “that’s going to be cheaper.”
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