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Gas players aligning, need fiscal terms Exxon, Conoco, BP, TransCanada tell governor they will look at LNG project; say ‘right business climate’ needed to unlock the resource Kristen Nelson Petroleum News
In October, Alaska Gov. Sean Parnell called for alignment of the North Slope producers around a gas pipeline project to tidewater. In a March 30 press conference, when the Point Thomson settlement was announced, Parnell said there were two milestones toward a gas line — the litigation settlement over a field containing some 25 percent of known natural gas on the North Slope and alignment of the producers around a gas pipeline project to tidewater (see story on settlement on page 1 of this issue).
The settlement makes it clear that the state’s top priority for Point Thomson is use of the gas.
“The settlement incentivizes efforts to commercialize the North Slope’s vast gas resources by: helping to position Point Thomson for gas development; facilitating the alignment of interests between the major North Slope producers and the state; and installing critical infrastructure for gas sales,” the Alaska Department of Natural Resources said in a fact sheet on the settlement.
Next generation of resource development In a March 30 letter to Parnell, the CEOs of ExxonMobil, ConocoPhillips and BP said the companies are making progress on “the next generation of North Slope resource development.”
That resource is natural gas, they said, which has been used to date to enhance North Slope oil production: “However, under the right business climate, the full commercial potential of this world-class resource can be unlocked.”
ExxonMobil and TransCanada have been working on a project to take North Slope gas to markets in the Lower 48 under the framework of the Alaska Gasline Inducement Act, or AGIA, but there has been general agreement that alignment between all of the North Slope producers, a pipeline company and the state will be necessary to commercialize North Slope natural gas.
Because of a huge supply of natural gas available currently in the Lower 48 and higher market prices in the Far East, Parnell has called for alignment around a liquefied natural gas project at tidewater in Southcentral Alaska.
The agreement is just the first step, Parnell said at a March 30 press conference.
LNG alternative In their March 30 letter, CEOs of the major North Slope producers laid out some of the work they see ahead to achieve alignment under an AGIA framework.
They said commercialization of the 35 trillion cubic feet of discovered natural gas on Alaska’s North Slope “will not be easy.”
With a rapidly evolving market, a large-scale LNG export from Southcentral Alaska “will be assessed as an alternative to gas line exports through Alberta,” the letter says.
The companies said they are “working together on the gas commercialization project concept selection, which would include an associated timeline and an assessment of major project components including in-state pipeline routes and capacities, global LNG trends, and LNG tidewater site locations, among others.”
A March 30 press release by the companies included TransCanada, which is working on the Alaska Pipeline Project (as the state’s AGIA licensee) in partnership with ExxonMobil.
Challenges “There are many challenges and issues that must be resolved, and we cannot do it alone. Unprecedented commitments of capital for gas development will require competitive and stable fiscal terms with the State of Alaska first be established,” the companies said in their letter to Parnell.
They noted that stable fiscal arrangements have opened other opportunities around the world, “and will play a pivotal role in making Alaska competitive in the global market and unlocking the economic potential of North Slope resources.”
Parnell said in the March 30 press conference that the companies intend to complete concept selection work this fall and said the state will be monitoring that progress.
The benchmarks laid out by Parnell in his January 2012 state-of-the-state address included settlement of the Point Thomson litigation and formal alignment of the producers under an AGIA framework, including work on a large-diameter LNG line to tidewater by the second quarter of 2012; completion of discussions with the Alaska Gasline Development Corp. on the potential to consolidate projects by the third quarter of 2012; and hardening of numbers for an Alaska LNG project, including identifying a pipeline project and a work schedule by the third quarter.
He said that if those benchmarks are met that the 2013 Legislature would take up gas tax legislation designed to move the project forward. Parnell has said in the past that he won’t negotiate separately with the players on a fiscal system for gas, but only with a project.
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