|
North Slope producers’ LNG study group closing up shop
Kristen Nelson
The Alaska North Slope LNG Project, started up with much fanfare in August 1998, is near completion of its second phase work and team members have returned to their respective companies to evaluate the commercial viability of the project.
The official word came from Phillips Alaska Inc. spokeswoman Dawn Patience on Oct. 15 when she told PNA, “The Sponsor Group LNG Study project is nearing completion of its stage two work. Members of the team have returned to their respective companies and each company will be evaluating the study data and reaching its own conclusions by year-end.”
An industry source close to the project told PNA it was “dead in the water.” (See related Yukon Pacific news item on page 6.)
Engineering work begun in 1998 The sponsor companies signed an agreement which called for “significant engineering, permitting and commercial work over the next four years to advance the prospects of exporting Alaska North Slope natural gas to East Asia as liquefied natural gas.” The project included a gas treatment plant on the North Slope, a pipeline to Valdez, an LNG plant and marine terminal and LNG tankers. The group also looked at Nikiski as an alternate site for the LNG plant and marine terminal.
Stage one, a $12 million engineering design effort, was completed in 2000, and the sponsors said that the most economic project was one half the 14 ton size they started with: a 7 million tons-per-year project with an estimated $7 billion capital cost, including shipping.
Steve Alleman, commercial manager for the project, told PNA in August 2000 that stage one produced a “market viable” project with significantly reduced financial and market risk.
Stage two to be commercial Alleman said stage two was approved for a budget of about $3 million, and would be commercially focused.
“It’s not just economics,” he said. “It’s competing with other projects.” The sponsors “have to know what the risk looks like” and get the financial markets “to accept the fact that we are a competitive project.”
In February, Alleman and George Findling, Phillips’ manager of external strategies for gas commercialization, answered questions about the project from the Alaska House Special Committee on Oil and Gas.
Asked about competition from other Asian LNG projects in which North Slope producers are involved, Alleman said: “We’re still trying to make this a commercially viable project.”
And Findling said what’s at issue is “the fundamental cost structure of projects. …The fact that it’s 800 miles away from tidewater is an issue that we have to find a way to overcome through some kind of innovation.”
The 1998 sponsor companies were ARCO Alaska Inc., which organized the effort, Foothills Pipe Lines Ltd., Marubeni Corp., Phillips Petroleum Co. and CSX Corp. through subsidiary Yukon Pacific Corp. Yukon Pacific dropped out in 1999 and was replaced by BP Exploration (Alaska) Inc. early in 2000. Phillips took over the ARCO Alaska membership through acquisition.
The LNG sponsor group worked out of ARCO, later Phillips, offices in Anchorage.
| 