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AIDEA studying Cook Inlet LNG plant The public corporation is considering a proposal to invest in a Greenfield LNG facility that would be tied to Japanese markets Eric Lidji Petroleum News
The Alaska Industrial Development and Export Authority is considering a proposal by a Japanese company looking to build a liquefied natural gas export plant in Cook Inlet.
In April, the board of the public corporation unanimously approved a resolution to spend up to $240,000 conducting due diligence on the project, which would export LNG overseas, ship LNG to coastal and road-system communities in Alaska and encourage exploration and production by creating an additional market for Cook Inlet natural gas.
The project sponsor is Resources Energy Inc., an American subsidiary that the Japanese-based Energy Resources Inc. created in late 2011 to pursue an Alaska LNG project in the wake of the failure of the Fukushima Daiichi nuclear power plant. The company has an Anchorage office and has met with state officials, including the now-defunct Alaska Natural Gas Development Authority. Former Alaska Natural Resources Commissioner Dan Sullivan met with company officials during a September 2013 visit to Japan where he signed a memorandum of understanding with Japan Bank for International Cooperation. The agreement “focuses on opportunities for Japanese companies and JBIC to become involved in resource development projects in Alaska - in particular, a large-volume liquefied natural gas pipeline and export facility,” Sullivan said at the time.
According to an outline of the proposal provided by AIDEA, the goal of the project is to provide additional storage that would help the Alaska energy system better meet peak winter demand, and then to export surplus supplies to the Japanese power market.
The $1 billion project would construct a new 1 million to 1.5 million metric ton per year plant with associated pipelines, marine facilities, loading facilities and storage tanks.
Phase one under way With the current due diligence effort, AIDEA is considering the basic structure and economics of the project, proposed supply and off-take agreements, potential locations for the plant and the interplay between Japanese and Alaska energy needs. The effort is expected to take 90 days, which would bring it to a conclusion sometime in late July, at which point AIDEA would decide whether to pursue an investment in the project.
This initial phase includes an agreement requiring REI to reimburse AIDEA for 75 percent of the cost of conducting the prefeasibility analysis, up to $180,000. The remaining AIDEA portion would come from money left over from previous projects.
The subsequent phases would focus on crafting appropriate investment arrangements and would likely take another seven months, according to AIDEA, making the entire process of creating and closing the deal take about a year from the initial vote in late April.
Buying Spectrum pad AIDEA is currently deep into a different public-private partnership to construct a North Slope LNG facility to supply a trucking operation to bring natural gas to the Interior.
Although AIDEA had been developing the “B2” pad on the North Slope, the agency recently purchased a pad from Spectrum Alaska LLC to house the plant. AIDEA made the switch after BP Exploration (Alaska) Inc. said the proposed B2 pad would have created some challenges for establishing fuel connections. The sale gives AIDEA rights to the Spectrum pad, an associated state right of way and key permitting documents.
Spectrum Alaska was one of the three entities that applied to be the private partner in the upstream portion of the Interior Energy Project. AIDEA chose MWH Americas Inc.
FNG splitting supplies The Interior Energy Project is also funding distribution in the Interior.
Fairbanks Natural Gas recently said it would use a $15 million AIDEA loan to construct distribution lines throughout its service area in Fairbanks this year and next year, but “does not anticipate placing these lines into service” until the entire trucking system is operational, the utility recently told the Regulatory Commission of Alaska. Fairbanks Natural Gas told regulators that it intends to buy 6 million gallons of LNG per year from the North Slope facility. The remainder of its supplies would continue to come from Cook Inlet, through a long-term contract held by its affiliate Titan Alaska LNG LLC.
Referring to the proposed Cook Inlet LNG facility, Fairbanks Natural Gas also told regulators, “This plant could conceivably be located in the Matanuska-Susitna Borough, and could conceivably provide a seasonal LNG supply to the Fairbanks market.”
Through its parent company, Fairbanks Natural Gas was the other entity that sought to partner with AIDEA on the North Slope facility. After being passed over in favor of MWH Americas, Fairbanks Natural Gas and its affiliates subsequently abandoned long-running plans to move their entire supply source to the North Slope from Cook Inlet.
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