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AGDC, Conoco, sign JV MOU
The Alaska Gasline Development Corp. has signed a memorandum of understanding with ConocoPhillips Alaska Inc. regarding negotiations to form a joint venture company for marketing Alaska LNG.
AGDC said Sept. 21 that the joint venture company “could facilitate marketing LNG from the Alaska LNG project to global LNG markets and acquire North Slope gas, with the goal of bringing LNG buyers and North Slope wellhead sellers together.”
The state has been in partnership with BP, ConocoPhillips and ExxonMobil in the AKLNG project, which reaches the end of its preliminary front end engineering design phase this fall. After the state’s partners said they were not ready to move to FEED but wanted to pause the project because of market conditions, Gov. Bill Walker said he was not willing to pause. He said the state would take leadership in the project and work to find a way to move forward.
Walker has said that he hopes the state can continue to partner with the North Slope producers going forward, and the producers have said they would be willing to sell their North Slope natural gas to a project under reasonable commercial terms.
Part of broader plan AGDC said the MOU is part of a “broader plan to position the Alaska LNG Project for a FEED decision,” with other parts of the plan including:
•Seeking a federal rule on tax exempt status - part of structuring for federal and state tax efficiencies;
•Advancing low-cost financing and investor options;
•Engaging engineering, procurement and contracting companies “with the ability to shoulder a significant part of the construction risk”;
•Enrolling major North Slope producers to commit their natural gas “to the planned JV or tolling arrangements with the project”; and
•Positioning a joint venture company to engage the market on the extent and timing of LNG demand.
“The MOU focuses on leveraging the strengths of the parties to advance the goal of economic commercialization of the vast North Slope natural gas resources,” AGDC said.
Activities anticipated in the MOU include raising market awareness of North Slope natural gas and the Alaska LNG project. Once the joint venture has been formed, sales and negotiation activities with global buyers could begin.
“We are pleased to be working with ConocoPhillips, the leader in Alaskan LNG, in this important phase of Alaska’s major infrastructure project,” AGDC President Keith Meyer said.
Initial focus of the joint venture is expected to be gathering LNG market data. It would also work on terms for gas supply for the project.
“The MOU anticipates that other producers or third parties could join the JV, make gas available via wellhead sales, or commit to tolling arrangements with the Alaska LNG Project,” AGDC said.
Walker pleased Walker, in a statement from Singapore where he is discussing marketing Alaska LNG, said he is “pleased that AGDC and ConocoPhillips will be working together to negotiate formation of a joint venture marketing entity.”
Walker noted that ConocoPhillips has been shipping LNG from Nikiski for more than 40 years, “the longest such contract in LNG history” and said the JV “will provide new opportunities to develop our LNG resources for a global market.”
The Nikiski LNG facility, originally a partnership of Phillips Petroleum Co. and Marathon Oil Co., began shipments to Japan in 1969. Shipments in recent years have been intermittent. ConocoPhillips mothballed the plant in early 2013 and restarted it in early 2014, shipping five cargoes that year and six cargoes in 2015.
The company did not export any LNG from Nikiski in the first quarter of 2016, although it secured an extension to its Nikiski LNG export license from the U.S. Department of Energy.
The company told Petroleum News in August that while the plant remains operational and ready to resume exports, none are currently planned due to market conditions.
- KRISTEN NELSON
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