|
AGDC cuts staff; will focus on completing FERC permitting process
Kristen Nelson Petroleum News
The direction of the Alaska Gasline Development Corp., which manages the Alaska LNG Project for the state, changed last year after Gov. Mike Dunleavy was elected. Dunleavy replaced a majority of AGDC board members, and the new board replaced AGDC’s president and returned to a stage-gate process, which requires an evaluation of whether the project should advance at specified stages in the process.
A previous iteration of the Alaska LNG Project, in which the state partnered with BP, ConocoPhillips and ExxonMobil, reached such a stage-gate in 2016 following completion of preliminary front-end engineering and design, with the industry partners declining to move forward into FEED based on economic issues, and AGDC taking over on behalf of the state as the project’s sole proponent.
This was under former Gov. Bill Walker, who has been a proponent of an Alaska LNG project for decades.
Using a tolling model, where infrastructure would be paid for by shipping fees on the pipeline and processing fees at the liquefaction facility, AGDC under Walker signed a preliminary joint development agreement in November 2017 with China Petrochemical Corp., CIC Capital Corp. and the Bank of China Ltd. to work on commercialization of Alaska North Slope natural gas with 75% of the natural gas going to China.
January update In a January presentation to the Alaska Support Industry Alliance’s Meet Alaska Conference, Revenue Commissioner Bruce Tangeman said Dunleavy was very familiar with the Alaska LNG project and with mega projects and the stage-gate process because of the state’s former industry partners. He said it was a great comfort that the state doesn’t have to be out there welding pipe because it had partners who’d done this around the world.
“We were going to jump on their back and ride them across the finish line to a successful and profitable project,” Tangeman said of the project when it included North Slope producers as partners.
He emphasized that the initial goal of the project - under its pre-Walker leadership - was a profitable economic driven project, not a schedule driven project.
It has been several years since there was a stage-gate discussion, Tangeman said, and several years since the Legislature has really been involved.
He said the Dunleavy administration looked forward to re-engaging with its North Slope partners and said the administration would be discussing the project with the state’s former partners to see if they were interested in reengaging with the state.
He emphasized that a stage-gate approach would be put in place, “so we know - and Alaskans know - exactly how we are going to move the project forward.”
Under the previous administration, 100% of the risk was brought inhouse to the state. “Gov Dunleavy is not comfortable with that,” Tangeman said: It is important to bring partners back in - if this is to move forward, the state needs to share the risk.
In March, BP and ExxonMobil began working with the state to evaluate project economics, and later committed to participate financially.
Cutbacks AGDC received lump-sum funding from the state Legislature and required budgetary approval, but not an annual budgetary allocation. It has been cutting back on its spending for some time, stretching out monies it had as it sought approval to accept third-party investment to move the project forward, authority which it has not received.
AGDC’s goal under the Dunleavy administration has been to complete the Federal Energy Regulatory Commission permitting process. FERC issued a draft environmental impact statement for the project at the end of June, putting the project online to receive a final EIS next year, followed by a record of decision for the project.
Following receipt of the FERC DEIS, AGDC reduced staff.
It had been operating with 20 positions of an authorized 26.
AGDC released a statement from interim President Joe Dubler July 11, describing cuts to staff.
“AGDC is restructuring to reflect our primary focus on completing the FERC permitting process to advance the Alaska LNG project,” Dubler said. “AGDC will continue to pursue FERC authorization, expected in June 2020, with an eight-person technical staff plus contract support as needed, and reduce employee headcount by twelve. Completing the permitting process will substantially de-risk Alaska LNG and open the door to a wider range of potential project parties with the broad expertise required to unlock the value and manage the risks associated with a project of this magnitude.”
MOU Dubler, who had been in senior leadership positions at AGDC between 2010 and 2016, told legislators in March presentations that one reason he was interested in coming back to the project was that the Dunleavy administration was working on re-engaging with the North Slope producers. All three were approached and BP and ExxonMobil were willing to enter into a non-binding memorandum of understanding.
Lt. Gov. Kevin Meyer told the Alaska Oil and Gas Association’s annual conference in Anchorage May 30 that BP and ExxonMobil were each contributing up to $10 million toward getting the Alaska LNG project through FERC certification, something he said AGDC estimated would take another year and $30 million.
Under the MOU AGDC, BP and ExxonMobil had undertaken a review of commercial and technical issues, Dubler told legislators in March, with a meeting scheduled in April in Houston with engineers from all three entities. The goal, he said, was to lower the total installed cost.
The future In response to questions on the status of commercial and marketing activities at AGDC following the current staff cutbacks, Tim Fitzpatrick, AGDC vice president, external affairs and government relations, told Petroleum News in a July 17 email that AGDC is focused on completing FERC permitting.
“The market, not the state, is better suited to unlock the value and manage the risks associated with a project of this magnitude. AGDC remains enthusiastic about the benefits of monetizing North Slope natural gas and will continue to represent the state in the project in its role as a sovereign entity.” He said “AGDC believes that there may be a path to commercial success for Alaska LNG. A successful commercial outcome is more achievable if the project is led by parties with the broad expertise required to unlock the value and manage the risks associated with a project of this magnitude.”
While AGDC completed the permitting for the in-state project, the Alaska Stand Alone Pipeline, ASAP, and shelved those permits, Fitzpatrick said “ASAP and Alaska LNG share a number of permitting characteristics but the business cases underlying each project are very different,” with the economics for ASAP challenged because of demand limits from Alaska’s small population - that project is for in-state gas delivery only.
“Alaska LNG can overcome that challenge by monetizing a larger quantity of gas, both for in-state and export sales. It will ultimately be up to the market to determine whether Alaska LNG continues beyond the permitting stage,” Fitzpatrick said.
- KRISTEN NELSON
| 