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AKLNG partners explore options; will continue pre-FEED work
Discussions are underway among Alaska LNG Project partners on options to reduce costs for the multibillion dollar project in the face of low energy prices.
In a joint appearance Feb. 17, Gov. Bill Walker and representatives of the state’s AKLNG partners ExxonMobil, BP and ConocoPhillips said they will continue to work together to explore options to advance the project in what they called the current challenging fiscal times.
Technical work associated with the work plan and budget is on track to have preliminary front-end engineering and design work completed this fall.
Walker said the impact of low oil prices on the project has been the elephant in the room for some time. He said the state’s partners in AKLNG brought up the discussion of how the project could be advanced given the low price of energy and the state had recently begun discussing the issue with them.
The governor said “we will be looking at different options, different structures of how that would work.”
“What we don’t want to do is have any sort of loss of momentum on this project because of the financial situation ... across the world as a result of long-term low oil prices,” Walker said.
Partners committed The state’s industry partners all emphasized - in a statement and at the joint appearance in Anchorage - that they remain committed to working on the project.
“BP remains committed to an Alaska LNG project that includes the State of Alaska,” BP Alaska President Janet Weiss said in a statement. “We will continue to work with all the parties to deliver a project with a competitive cost of supply.”
“Given the economic headwinds the oil and gas industry is facing today, it makes sense to explore options for the AK LNG project,” said Joe Marushack, president of ConocoPhillips Alaska. “We are working collaboratively to develop alternative approaches to commercialize North Slope gas.”
“ExxonMobil remains committed to commercializing Alaska’s natural gas, and we are committed to working with the project participants to explore options that would continue to progress that goal,” said Jim Flood, vice president of ExxonMobil Development Co.
No details yet Walker said at the press conference that “I think we’re going to see in the next month or so some options for this project moving forward.”
As to what those options might be, the governor said “it’s probably too soon to go into specifics on that - that’s what we’re going to be working on in the next month or so as to what that would look like.”
The point of the announcement, he said is that there’s potential change in the project “and we wanted to clarify that we’re all working collaboratively to find the structure that brings down the cost to the greatest degree and maintains the project going forward.”
Speaking in Anchorage, Weiss said pre-FEED work is being completed. “And the whole point here is to get to the lowest cost of supply and have a competitive project.”
Marushack said “we’re in pre-FEED ... right now and we’re going to stay in pre-FEED. That’s a big effort to try to get some more information about what’s the total cost of the project, where we can reduce some costs, what the challenges might be. So that’s what we’ll be focusing on,” he said.
ExxonMobil’s Steve Butt, AKLNG project manager, speaking from Houston, said $500 million has been spent between concept and pre-FEED work to date and more will be spent this year wrapping up pre-FEED work. “And based on what we learn from that work, we’ll want to understand whether we have a project that can be competitive on cost of supply. ... And it’s going to take a little bit more time and a little bit more money to understand that information and assess all the options that may come out of that.”
The constitutional amendment The state has been pressing for completion of AKLNG commercial agreements by the end of the current legislative session so that legislators could approve those agreements in a special session, making way for approval of a constitutional amendment for project fiscal stability to appear on the November 2016 general election ballot.
It appears those agreements won’t be complete, but Walker said a change in structure could lead to “commercial arrangements ... different than originally anticipated. I think we’re looking at ... all options on the table how to progress the project.”
Asked about the possibility that a constitutional amendment wouldn’t be on a general election ballot until 2018, Walker said “there may be ways of providing the kind of fiscal certainty that is appropriate without doing that and so we’ll look at that during this period of time to see if there’s other options.”
But, he said, “it’s still a possibility” that a constitutional amendment could be on this year’s ballot, although both the administration and Legislature have full plates right now.
Walker also said that the commercial agreements “may not be as critical as they once were from a timing standpoint.”
- KRISTEN NELSON
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