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ANGDA to issue RFPs for spur line, LNG work Alaska Natural Gas Development Authority report on work to date published in Alaska newspapers and available online Kristen Nelson Petroleum News Editor-in-Chief
The Alaska Natural Gas Development Authority published its report on what has been accomplished to date in early September, and at a Sept. 13 board meeting looked at its next step, contracting half a million dollars in work for two major projects: a right-of-way application for a spur line from Glennallen to Palmer and technical and design issues for different liquefied natural gas projects.
Alaska’s voters established the authority in November 2002 to get a North Slope natural gas project moving, and the authority is looking at a variety of options, including LNG projects and a spur line or a small-diameter standalone line to Southcentral Alaska.
Harold Heinze, the authority’s chief executive officer, told the board that work contracted to date is substantially done, although he is still reviewing some reports before final acceptance to ensure that they answer all of the questions the authority asked. Work completed by contractors was used in preparation of the authority’s September report, “The all-Alaska LNG Project: A Report to the People.”
Heinze summarized major work to date.
He said Stone & Webster’s report on LNG plants found it would be more expensive to build an LNG plant in Alaska because of labor costs and also identified new safety and health issues around the spacing between LNG trains after an explosion in Algeria in January took out three LNG trains. This has implications for the Yukon Pacific layout at Anderson Bay near Valdez, Stone & Webster said, because the risk of losing multiple LNG trains due to a single explosion is not acceptable to investors. Industry is close to accepting new spacing between LNG trains which is acceptable to lenders, the firm said in its report. Alaska has similarities to other projects A report from Wood Mackenzie compares a proposed Alaska LNG project to other proposed projects. Heinze said no one can compete with the economics at Qatar and Tangguh, projects that can put gas at the inlet of LNG plants at very low cost — with plants at the low end of the cost range — because of deals with governments. But, he said, there are several third world projects which are similar to the Alaska project in terms of cost, and “smart people made the decision to go ahead” with those projects.
Work from Bruce Wilson is starting to open up different thinking on LNG logistics, Heinze said. Wilson suggests that LNG trade on a global level is evolving so fast that it won’t look like today but will look more like oil, with global trading.
By the time Alaska LNG is ready, Heinze said, ships taking Indonesian LNG to Baja might sail north for five days after leaving Mexico and then take Alaska LNG to the Far East. Instead of making a 30-day roundtrip to deliver one shipment, they might take 40 days and deliver two shipments.
The result is that logistics will be less different between projects. Wilson saw the evolution of the oil trade, and believes there are a lot of changes coming in the marine side of LNG, but, Heinze noted, while that would solve Alaska’s Jones Act tanker problem between Alaska and the West Coast, it wouldn’t solve the Jones Act tanker problem between Alaska ports. Spur line right of way part of work The authority has more contracts to award this fall for two areas of continuing work.
On the spur line to Cook Inlet, the authority will move ahead to obtain permits and a right of way on a route where no such work has yet been done. Contracts for that work are estimated at $200,000, Heinze said. The right of way could be used by the authority or the authority could sell the work to someone else.
The schedule for the contracting, based on having completed work by about April 1, 2005, would have requests for proposals out in mid-October with responses due by mid-November and contract award before the first of the year. Competitive bids would be solicited from Alaska contractors for a right of way for the spur line from Glennallen to an Enstar connection point in Palmer, some 140 miles.
There will be several contracts for the authority’s LNG project, with the same RFP and completion dates, estimated to total some $300,000, including project definitions for each of four alternatives, LNG plant concepts, co-use of the trans-Alaska pipeline facilities and operations, marine facilities, compressor stations and gas take-off points and project coordinator.
Heinze said he will be looking for Alaska contractors. There is more than enough expertise in the state, he said, and there is also an advantage to having work done locally so that contractors are available for regular meetings. Money available for contracts The goal of the new contract work, Heinze said, is to move forward. “This plan tries to take us to the next step” of finishing the feasibility report. What has been done, while “very preliminary,” found “no show stoppers,” he said.
The total for both sets of contracts, Heinze said, will be in the $400,000-$500,000 range.
Heinze said money for the right-of-way work and the LNG plant work is within existing funding, although the authority will use up its funding this fiscal year and request new and significant funding for the next fiscal year. Steve Porter, deputy commissioner of the Alaska Department of Revenue, concurred with Heinze that the money in discussion for these contracts should be within the range of money already approved by the Legislature.
A preliminary feasibility report now being finished will present a strategy for financing. Heinze said the authority might want to ask the Legislature for a few million dollars for the next fiscal year, money that it would use to go out for public financing. The authority will have a “placeholder” amount in the budget for the next fiscal year, he said, an amount which will be finalized after the upcoming set of contract work is completed and the authority can present the Legislature with a plan for moving forward.
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