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AGDC has signed for half of RIK-TAG Prudhoe, Point Thomson gas
Kristen Nelson Petroleum News
The Alaska Gasline Development Corp. has agreements to enter into definitive gas sales agreements with both BP and ExxonMobil, AGDC Vice President of Commercial and Economics Lieza Wilcox noted at AGDC’s Oct. 11 board meeting. What that means, she said, is that AGDC has signed for more than half of royalty-in-kind and tax-as-gas volumes, giving confidence to buyers in discussions.
Wilcox said they are making good progress in discussions with ConocoPhillips, and while she couldn’t promise the board an announcement date, she said AGDC is in the final stages of negotiating key terms with Conoco.
And discussions with BP and ExxonMobil to paper the more detailed gas sales agreements are progressing, she said, based on terms agreed to with each party in their respective gas sales precedent agreements. The agreement with BP was signed in May, that with ExxonMobil in September.
Estimated volumes Wilcox shared estimated volumes available for the Alaska LNG Project from Prudhoe Bay and Point Thomson.
The state’s estimated volume from Prudhoe Bay, if the state took its gas as royalty-in value, would be a cumulative 3 trillion cubic feet; if the state took the gas as molecules (royalty-in-kind) - which is the plan if the companies offer to pay tax as molecules (TAG or tax-as-gas) - the state’s cumulative Prudhoe volume would be 6 tcf.
Estimated Prudhoe Bay volumes for the companies are: ExxonMobil are 6.55 tcf for RIK/TAG; for ConocoPhillips 6.49 tcf; for BP 4.74 tcf; and for Chevron 0.2 tcf.
Estimated volumes from Point Thomson, are 1.5 tcf combined RIK/TAG for the state; 2.82 tcf for ExxonMobil; 1.44 tcf for BP; and 0.24 tcf for all others.
The total is an estimated 24 tcf from Prudhoe Bay and 6 tcf from Point Thomson
Wilcox said that as part of its best interest finding process the Department of Natural Resources solicited interest in its royalty-in-kind gas from Prudhoe Bay and Point Thomson. AGDC, she said, responded that it was interested in acquiring all of the state’s natural gas for the project.
Joint development agreement Wilcox said the parties to the joint development agreement were advancing all agreements. She said a supplemental agreement was signed in September, with a confirmed goal of definitive agreements at the end of the year.
The joint development agreement signed Nov. 9, 2017, in Beijing involved the state, AGDC, China Petrochemical Corp. (known as Sinopec), CIC Capital Corp. and the Bank of China Ltd.
Wilcox said AGDC was negotiating sales and purchase agreements with key parties and discussing regional cooperation with select parties.
Equity offering rollout AGDC, Goldman Sachs and Baker Botts discussed the equity offering process in early October, Wilcox told the board. She said work is underway on a non-confidential presentation and/or equity book to be provided to potential equity investors and the Legislature in the fourth quarter of 2018 or first quarter of 2016.
She said AGDC would begin the initial road show to introduce the project to potential equity investors with a project overview and said the board would have a package for approval prior to the equity road show outlining equity offer terms, methods for investment and commercial structuring.
More questions Frank Richards, AGDC senior vice president of program management, reviewed AGDC’s work on its Federal Energy Regulatory Commission application and progress of the environmental impact statement.
He noted that FERC has accelerated the schedule by about a month, with a draft EIS now scheduled for February, a final EIS for November 2019 and a final authorization/record of decision in February 2020.
He characterized the schedule as “very aggressive” and said it is a schedule FERC says it can commit to, and also the only project that was advanced in its schedule.
AGDC received another data request, with 193 items, on Oct. 2. AGDC is drafting responses, Richards said, and expects to have nearly half done by Oct. 22, the date by which it has to respond or say when responses will come. FERC has indicated what it needs for the draft EIS and what for the final EIS.
Richards said AGDC is nearly complete with five earlier data requests.
US v China AGDC President Keith Meyer told the board that China remains engaged with the Alaska LNG project, but that U.S.-China trade friction creates uncertainty. He said AGDC and the state continue to have regular discussions with Trump administration officials to avoid having Alaska LNG affected by the trade friction.
Gov. Bill Walker said in an Oct. 14 statement that U.S. Treasury Secretary Steven Mnuchin spent a day in Fairbanks learning about Alaska’s resource development potential. Walker said that at Mnuchin’s request there was a briefing on the Alaska LNG Project, led by Meyer.
“In my meetings with Secretary Mnuchin, both in Washington and in Fairbanks, he has expressed strong support for the Alaska LNG Project,” Walker said. “He understands that this is America’s infrastructure project and that it represents a trillion-dollar opportunity. When the Secretary requested this briefing, I selected Fairbanks because of the Pipeline Training Center, which demonstrates what this project will mean for Alaskan workers,” Walker said.
At the Oct. 11 AGDC board meeting Meyer noted that the LNG Canada project led by Shell is moving forward and said in its aggressive pursuit of China, Russia has mentioned Alaska as a potential casualty of the trade war.
Overall, he said, demand is increasing to grow with Asia remaining the largest regional driver and China surpassing Korea for the number two spot.
Not only is demand outpacing previous expectations, but the supply-demand balance has moved up from 2024-25 to 2022, Meyer said.
He reviewed Alaska’s competitive advantages, and said the strategy is to price Alaska LNG as an infrastructure project, rather than an oil alternative.
Meyer said AGDC is developing pricing and contract terms for in-state customers as well as identifying demand and interconnects. For communities not on the pipeline corridor, LNG can be delivered by truck, rail and barge, he said.
This year and next marketing activities will increasingly emphasize in-state marketing for both natural gas and in-state LNG, Meyer said.
- KRISTEN NELSON
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