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Gas pipeline port authority teams with Sempra Energy Project would take gas to Valdez for LNG; spur line would serve Southcentral Kristen Nelson Petroleum News Editor-in-Chief
The Alaska Gasline Port Authority’s “All-Alaska Gas Pipeline Project” has taken two steps forward, securing a potential West Coast market for liquefied natural gas and access to the permits Yukon Pacific developed for a right of way adjacent to the trans-Alaska oil pipeline and for a liquefaction facility site at Anderson Bay near Valdez.
The port authority said Dec. 20 that it has signed a development agreement with Sempra LNG, a unit of San Diego-based Sempra Energy, to assist in a pipeline and LNG marketing project. The port authority also said it has been granted the option to purchase rights of way and associated permits from Yukon Pacific for building the gas pipeline parallel to the existing trans-Alaska oil pipeline.
“With access to key permits and rights of way from Yukon Pacific, and the assistance of Sempra LNG, this project is positioned to deliver natural gas to market faster than any other alternative,” Fairbanks North Star Borough Mayor Jim Whitaker, chairman of the Alaska Gasline Port Authority, said in a press release. “We’re convinced that this project can deliver Alaskan gas to a comparable marketplace, while providing much greater benefits to Alaskans than alternative projects,” he said.
Donald Felsinger, president and chief operating officer of Sempra Energy, said in the port authority release: “It is important that the vast natural gas resources of Alaska be delivered to the U.S. markets as quickly and efficiently as possible, and we think this project has the best potential of doing that.”
The port authority estimates that the project could be ready to deliver LNG to the West Coast as early as 2011.
Port authority members include the City of Valdez, the Fairbanks North Star Borough and the North Slope Borough. Project would start at 3 bcf Whitaker told Petroleum News Dec. 21 that the project is planned to take 3 billion cubic feet a day off the North Slope in a 48-inch pipeline, but could easily ramp up to 4 bcf to 4.5 bcf a day.
Of the initial volume, Whitaker said not less than 2.5 bcf a day would go to Sempra.
The size of a spur line to Southcentral Alaska, part of the port authority’s plan to provide gas for in-state use, has not been determined, he said. But, he said, part of the port authority’s agreement with Sempra is that “Alaska needs will be met first. They fully understand the need for in-state usage.” In-state usage of gas is “a core component to our project,” he said.
The port authority would need to acquire gas, and Whitaker said the authority is “preparing an offer for the producers and our intention is to present them with an offer as soon as possible … within the next couple of months.” The port authority is also in “ongoing discussions with the state on royalty gas,” he said, based on the authority’s protocol agreement with the state.
The North Slope Borough is still technically a member of the port authority, Whitaker said, although they have requested out of the group based on what the borough believes is a conflict of interest. Whitaker said the port authority and the borough have resolved the situation and will seek a statutory change allowing a member of a port authority to withdraw. The question, he said, is whether one of the entities in a port authority can, by state law drop out, and a statutory change would allow the North Slope Borough to exit without damaging the port authority. Authority believes it has a time advantage Whitaker said that with the acquisition of Yukon Pacific’s rights of way and permits, “we think that we have acquired a significant time advantage. With the development agreement with Sempra, we think that we have linked ourselves with the market.”
He said the authority believes these events give it a “significant advantage.”
Whitaker said the authority’s deal with Yukon Pacific is a purchase option, “our option is for stock and therefore the assets of the company,” and he said the authority wants “to move forward as quickly as possible.” Jeff Lowenfels, former head of Yukon Pacific, told Petroleum News, “I spent a long time working on the LNG project. I’d like to see it completed. Now I know I will.”
People always said the problem with the “LNG project was that the market wasn’t there. Now the market is there,” Lowenfels said. Agreement to try to develop project jointly Sempra Energy spokesman Doug Cline told Petroleum News this is basically “an agreement to move forward together and try to develop this project jointly.
“Our exact role is still being determined,” he said.
Sempra is developing an LNG receiving terminal in Baja California, Energia Costa Azul, which is expected to be the first LNG receiving terminal on the West Coast when it comes online in 2008, he said.
“The current processing capacity is 1 billion cubic feet a day of gas: that capacity is spoken for,” Cline said. But that terminal can be expanded, he said, and LNG from Alaska would be an “ideal source” for the terminal expansion.
As to what role Sempra could play in the port authority project, Cline said Sempra could assist the port authority “in securing the necessary permits for the process since we’ve gone through the permitting process on a number of pipelines and LNG terminals.” In addition to the Baja California LNG receiving terminal, Sempra is developing two other receiving terminals, one near Lake Charles, La., and the other near Port Arthur, Texas. Baja is the furthest along, Cline said, and will probably be the first new onshore LNG receiving terminal in North America.
“We think there is a strong potential for Alaska LNG in the U.S. market,” Cline said.
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