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Negotiations between the state of Alaska, major North Slope oil and gas producers and pipeline company TransCanada toward a partnership to develop the proposed Alaska LNG project will follow directions approved by state legislators April 20.

The legislation amends multiple state laws, allowing negotiations to proceed toward the state becoming an equity partner in the multibillion-dollar project. Passage was essential for the five-party deal that will govern designing, permitting, building and operating the project.

Project teams this summer will ramp up preliminary front-end engineering and design work, estimated in the hundreds of millions of dollars and expected to run through next year.

Full engineering, design and permitting would follow, estimated at more than $2 billion, with an investment decision whether to start construction possible by 2019.

Well before big money gets committed to construct a liquefied natural gas export project, sponsors typically spend years studying such questions as: Should this project get built? Does it make business sense? And, as the analysis progresses: Does this project continue to make sense?

The proposed $45 billion to $65 billion Alaska LNG export project is going through that process now.

For Alaska LNG, the current work is called pre-FEED — or pre-front-end engineering and design — which will be followed by a more intense FEED phase if the project continues.

It’s the up-front planning that is critical to megaproject success. Project sponsors that do this work poorly have a high probability of producing a failure. But when done well, this pre-construction effort can be the reason a project gets built on time and on budget, and creates the kind of cash flow the board of directors was told to expect.

ExxonMobil foresees multiple LNG projects needed

In ExxonMobil’s world view, an immense build-out of LNG plants will be needed in the next 15 years or so to satisfy burgeoning global demand for natural gas.


Guide to Alaska gas projects
and glossary of gas terms

blue gas flame

Hundreds of millions of state dollars have been allocated to a variety of projects that could move North Slope natural gas to market. These include an ambitious North Slope producer-led effort that could pipe massive amounts of gas to an LNG export plant, a small-volume state-sponsored pipeline project and an even smaller-scale proposal to truck LNG to Fairbanks, Interior Alaska’s largest community.

White Papers

The decision to break ground on a liquefied natural gas export project is a momentous move for the sponsors, a multibillion-dollar stake on their futures. Reaching what the industry calls a "final investment decision" takes time, money and tight coordination between multiple parties working on different parts of a project.

Sponsors and financial backers want to make sure they've done their due diligence.

After all, more than 90 percent of project costs — the money for production modules, compressors, pipe, motors, installation and construction — are incurred after the final investment decision.

That decision is a big breakthrough in a risky and uncertain multi-year process.


Permitting

Any project as large and complex as a multibillion-dollar natural gas pipeline from Alaska's North Slope will require numerous federal, state and local permits. Agencies have been working with developers on National Environmental Policy Act and permitting efforts for an Alaska gas line project.

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