Gov. Walker renews agreement with REI

KRISTEN NELSON

Petroleum News

Alaska Gov. Bill Walker said Dec. 17 that the state has extended its cooperation agreement with Resources Energy Inc. to develop Cook Inlet natural gas. REI is the American branch of Energy Resources Inc., a Japanese company and was formed to explore the possibility of purchasing natural gas from Alaska and building LNG facilities to export LNG to Japan.

When Walker signed the original liquefied natural gas agreement with REI in December 2014 he called it an important step in securing Alaska’s energy future.

Under the agreement the state will work with REI through a coordinated permitting system. The Alaska Industrial Development and Export Authority has also provided some of the funding through a memorandum of understanding for an independent pre-feasibility study to evaluate the preliminary potential of this LNG export project to support long-term competitive development of Cook Inlet feed gas supply and LNG contract prices.

In an update to the House Special Committee on Energy in March 2015, Mary Ann Pease, REI vice president and the company’s Anchorage general manager, said Japanese utilities started looking at opportunities after the Fukushima disaster in 2011. Focus was initially on North Slope natural gas, she said, but short-term focus is now on Cook Inlet gas, with a 1 million ton per annum greenfield plant planned on land adjacent to Port MacKenzie.

AIDEA has been working with REI on the proposed Cook Inlet project since April 2014 and at a Dec. 16, 2014, board meeting agreed to extend its funding from the original commitment of 25 percent of up to $220,000 for studies leading to a decision on project financing to 25 percent of up to an estimated $440,000.

Under the terms of the agreement the governor has renewed REI will share with the state “all non-proprietary and non-confidential studies” it has conducted on the feasibility of an Alaska LNG export project, and will report to the state “on its activities to organize markets and develop LNG receiving terminals in Japan.”

The parties agreed to cooperate in a number of areas: “marketing, financing, ownership, development and acquisition of gas, domestic requirements and marine transportation of LNG.”

The cooperation agreement also says that as an initial step to ship LNG to Japan, REI is developing a smaller LNG project, estimated at 1 million tons per annum, in Cook Inlet, targeting deliveries “prior to 2020.” The agreement says the state will work with REI “to facilitate development of this project by providing a coordinated permitting system and potential partial financing” through AIDEA.

The agreement is described as “nonexclusive,” with neither party excluded from engaging in “similar or non-similar agreements or projects with third parties.”

The original agreement was for one year; the renewal extends the agreement for two more years, through Dec. 14, 2017.

“Extending this agreement with REI shows Japanese consumers that Alaska is committed to exporting liquefied natural gas,” Walker said in a statement on the signing of the renewal agreement.