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Mitsubishi willing to help Alaska Proposal to assist with liquefied natural gas project does not include offer to buy LNG; but does include facilities design and construction, as well as transportation and gas marketing services Larry Persily Petroleum News Juneau Correspondent
Alaska officials are still reviewing a draft proposal from a Mitsubishi Corp. subsidiary to assist the state in its efforts to develop a liquefied natural gas project, including possibly helping to design and build needed facilities and to transport and market the gas.
There is nothing in the proposal, however, about the Japanese corporation buying Alaska LNG, said Harold Heinze, chief executive officer of the Alaska Natural Gas Development Authority.
The offer was described at the authority’s September board meeting as a sales pitch for Mitsubishi services.
“What it is is an offer of knowledge,” Heinze said of Mitsubishi’s proposal. “They’re willing to sit down with us and tell us what they know.” Law reviewing company’s proposal The Department of Law is reviewing the company’s draft memorandum of understanding, as are gas authority board members, and the document will be kept confidential until the legal review is completed, Heinze said.
The gas authority is trying to put together a state-owned LNG project, a goal that has escaped private companies for more than 20 years. Alaskans created the authority by a citizens ballot initiative last fall in the hope it could build a pipeline to Valdez and find a market for the gas, bringing jobs and tax revenues to the state.
Sound Energy Solutions, a subsidiary of Mitsubishi Corp., is pursuing plans to build an LNG receiving and regasification terminal at the Port of Long Beach, Calif. The terminal is one of several proposed to fill U.S. West Coast demand for natural gas. Mitsubishi’s proposed plant would handle as much as 700 million cubic feet of gas per day. Construction costs are estimated at up to $400 million, with start-up of operations perhaps five years away.
No offer to buy Alaska LNG Although news reports and a political press release have referred to Mitsubishi’s “offer” to buy up to 1 billion cubic feet per day of Alaska LNG, Heinze said there is no such detailed purchase offer in the company’s draft memorandum to the state gas authority.
“It is an offer in terms of their involvement, their services,” Heinze said, adding that he certainly hopes someday the gas authority and Mitsubishi could talk about LNG sales for the Long Beach facility. “Alaska knows pipeline construction,” he said, but is short on knowledge about liquefaction plants, LNG tankers and marketing, areas of expertise for Mitsubishi.
For example, Mitsubishi Heavy Industries Ltd. builds LNG tankers. Federal law, however, requires that only U.S.-built vessels could be used to carry Alaska gas to California, although a U.S. shipyard could use a Mitsubishi design to build a ship.
Democrats criticize administration While the gas authority reviews Mitsubishi’s proposal, Alaska’s Democratic legislators issued a press release Oct. 2 to say that the authority had received a proposal from Mitsubishi to purchase 1 billion cubic feet per day of Alaska LNG. The press release also said Sempra Energy had made a similar proposal to the authority to buy 1 bcf per day for its proposed LNG terminal on Mexico’s Baja Peninsula.
The Democrats have been critical of the administration of Republican Gov. Frank Murkowski for not responding more positively to the supposed Sempra and Mitsubishi offers.
Officials of San Diego-based Sempra Energy announced Sept. 10 that the state had just two weeks to get serious about negotiating an LNG supply contract for the company’s proposed Baja terminal, scheduled to open in four years.
Sempra silent on Alaska However, it’s been more than a month since Sempra set its deadline for the state to compete with other possible suppliers, including Indonesia and Bolivia, and company officials have made no further public statements about Alaska gas nor returned phone calls to Petroleum News.
Mitsubishi also is not limited to Alaska as its sole LNG supply source on the Pacific Rim. The company has interests in LNG ventures in Brunei, Indonesia, Malaysia, Australia and Russia. The company will become the first Japanese trading house to sell LNG for delivery to the United States when it starts supplying BG Group’s U.S. subsidiary with gas in November. The five-year contract calls for Mitsubishi to send about 17 billion cubic feet of gas per year to BG’s terminal at Lake Charles, La.
BG Group is a subsidiary of British Gas.
Mitsubishi a partner in Sakhalin gas Mitsubishi also is a partner with Royal Dutch/Shell in Russia’s Sakhalin-2 natural gas project, reported in several oil and gas trade publications as the likely source if the Japanese company enters the U.S. West Coast LNG market.
The company has not identified any specific sources of LNG for its proposed terminal at Long Beach, other than its announcement in May that “projects around the Pacific Rim are considered to be gas sources.”
Heinze said he plans to send back to Mitsubishi an edited version of the draft memorandum of understanding just as soon as the Department of Law and his board members have completed their review of the document.
Though the gas authority has not released the full document, it distributed a summary of the draft memorandum: “Mitsubishi … is ready to assist the project to make it as viable and feasible as possible utilizing Mitsubishi’s expertise and resources, and Mitsubishi has a desire to investigate opportunities to participate in the project through cooperation in the LNG sales, marketing, liquefaction, storage and shipping component of the project.”
The Alaska Natural Gas Development Authority’s next board meeting is set for Oct. 20 in Anchorage.
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