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AKLNG 2016 plan, budget OK’d; Walker releases gas agreements
After something of a cliffhanger, with a vote delayed and the chair of the board fired by the governor, the Alaska Gasline Development Corp. board voted unanimously at a Dec. 3 meeting to approve the state’s share of the 2016 budget for the Alaska LNG project. Later that day, the AKLNG partners - AGDC for the state, BP, ConocoPhillips and ExxonMobil - also voted unanimously to approve the budget.
Approval of the 2016 work plan and budget continues preliminary front end engineering and design work on the project, designed to move North Slope natural gas to Nikiski for liquefaction, and then ship liquefied natural gas to the Far East. If the budget had not been approved, the project would have wrapped up for lack of funding.
Alaska Gov. Bill Walker had made the state’s approval contingent on an agreement that producers would make their natural gas available to a project should they withdraw.
He got written agreements with BP and ConocoPhillips and said he received verbal assurances from ExxonMobil.
On Dec. 8 the governor made the agreement with BP and ConocoPhillips public. The document, dated Dec. 4, was signed by Department of Natural Resources Commissioner Mark Myers, by ConocoPhillips Alaska Vice President Leo Ehrhard and by BP Exploration (Alaska) President Janet Weiss.
“I thank BP and ConocoPhillips for making public the signed agreement so Alaskans can fully appreciate the significance of this project milestone,” Walker said in a statement. “This agreement ensures that there will be gas for a gasline if either partner withdraws from the project.”
“As we work to solve the state’s fiscal problems, it is important that we continue to negotiate with partners commercially reasonable and mutually agreed terms to ensure a gasline project,” Walker said. “This public agreement is the assurance this project has long needed to ensure a pipeline project.”
Gas availability agreement The Dec. 4 gas availability agreement between the state, BP and ConocoPhillips provides that if a party withdraws from the project, “such Non-continuing Party will make its gas available to the State or its designee if mutually agreed commercially reasonable terms can be reached between the relevant Party and DNR.”
The agreement also says the parties agree that AKLNG is “currently targeting a FEED sanction decision for the AKLNG Project no later than July 1, 2017.”
The agreement can be terminated by written agreement of all parties; by execution of an agreement on mutually reasonable terms; if the state gives notice that it does not intend to continue with the project; 90 days after any party notifies the others that “it has become aware of the expiry or termination of the Alaska LNG Project Pre-FEED Joint Venture Agreement, if such expiry or termination occurs”; or on Dec. 1, 2017.
Negations will be bilateral, with DNR negotiating separately with ConocoPhillips and BP.
2016 plan In a statement following approval of the 2016 work plan and budget AKLNG said a key component of the 2016 work program will be developing and executing “a comprehensive contracting strategy to provide sufficient time for bidders to prepare competitive and quality bids for front-end engineering and design (FEED), the next stage in the project’s development.”
Project sponsors have spent $350 million to date on pre-FEED work.
“The project participants see an opportunity in 2016 to advance activities that were initially planned for the FEED stage of the project,” Steve Butt, AKLNG senior project manager, said in the statement. “This early effort will provide participants with higher quality information and analysis to help better support a FEED funding decision.”
The project said filing draft environmental and socioeconomic resource reports with the Federal Energy Regulatory Commission is a key component of the approved 2016 work plan.
Also included is completing the feasibility evaluation and cost implications of a 48-inch diameter pipeline option. The project had been working on a plan for a 42-inch diameter line, which it said optimized delivery of natural gas from Prudhoe Bay and Point Thomson. Walker pushed for a 48-inch line, arguing that it would allow for other North Slope natural gas to be developed and shipped through the line.
The project said a FEED funding decision is anticipated in mid-2017, “in line with the Heads of Agreement signed by the State of Alaska and the Alaska LNG project participants in 2014.”
Acting AGDC board Chairman Dave Cruz said in a statement after the board vote, “This is a monumental occasion for Alaska. Today’s vote is a clear indication of our commitment to get this project built.”
Funds contingent on ‘yes’ vote In a statement following the AGDC board vote House Speaker Mike Chenault, R-Nikiski, congratulated the board on its unanimous vote to approve the 2016 AKLNG work plan and budget.
“Thank you, first, to Dave Cruz for leading the AGDC Board through its transitions. This was a good first step for the new Board. I, too, shared in the uncertainty and worry voiced by many over the direction of the new Board and its leadership team, but that’s been tempered with today’s vote.”
Chenault said the board’s vote was expected, but noted the Legislature “guarded against a ‘no’ vote during the special session approving the TransCanada buyout by making the funding contingent on a ‘yes’ vote to continue the project.”
He said legislators “will closely watch the movement of the Corporation and will carefully scrutinize their efforts as we get through the upcoming legislative session.”
Commenting on the recent departure of former board Chair John Burns and AGDC President Dan Fauske, Chenault said: “AGDC has talented people in place, diligent and accomplished Alaskans. Here’s hoping the Walker Administration gets leadership in place that melds well with staff and keeps the proving moving a pace.”
“Today’s ‘yes’ vote was critical for advancing a natural gas pipeline,” Senate President Kevin Meyer, R-Anchorage, said in a Dec. 3 statement following the AGDC board vote. “The project is still on track to supply our natural gas to Alaska’s homes and world markets. We are glad to see our state gas team moving this project forward with confidence.”
Sen. Cathy Giessel, R-Anchorage, chair of the Senate Resources Committee, said: “AGDC’s vote means the largest infrastructure project in North America continues for another year. AKLNG was given yet another green light, and while there’s much more to do, the project continues to progress toward real engineering and design work.”
The Alaska Legislature approved a $68.5 million buyout of TransCanada’s share in AKLNG in the special session which ended Nov. 5, along with $75.6 million for the state’s share of the 2016 work program and budget.
Following the TransCanada buyout the state, through AGDC, holds a 25 percent interest in the project, based on taking its North Slope natural gas royalties and taxes as natural gas.
- KRISTEN NELSON
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