Alaska producers envision LNG export ‘mega-project’

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Researcher/Writer, Office of the Federal Coordinator
Release Date: 
October 4, 2012

Alaska North Slope producers are considering building one of the world's largest and most expensive liquefied natural gas projects, according to a letter the companies sent this week to Gov. Sean Parnell. The exports primarily would target Asian markets.

The early concept envisions a project costing $45 billion to possibly more than $65 billion, with exports of 15 million to 18 million metric tons of LNG annually, the equivalent of 2 billion to 2.4 billion cubic feet a day of natural gas. The cost estimate includes a gas treatment plant, pipeline to tidewater and a liquefaction plant.

The Oct. 1 letter from executives of ExxonMobil, ConocoPhillips, BP and pipeline company TransCanada stressed that their project is in its early stages of planning. They estimated a decision on whether to actually build the project is at least three years away, and if they do build it, the first LNG wouldn't flow before the early 2020s.

"We have narrowed the broad range of alternative development concepts and assessed major project components, including the gas pipeline, gas treatment to remove CO2 and other impurities [from the produced gas], natural gas liquefaction, LNG storage, and marine terminal facilities," the letter says. "Individually, each of these components would represent a world-class project. Combined, they result in a mega-project of unprecedented scale and challenge: up to 1.7 million tons of steel, a peak construction workforce of up to 15,000, a permanent workforce of over 1,000 in Alaska, and an estimated total cost in today's dollars of $45 to $65+ billion."

The next steps include preliminary engineering, environmental data collection, assessing commercial viability and working with the Alaska state government to set long-term fiscal terms. "The facilities currently used for producing oil need to be available over the long-term for producing the associated gas for an LNG project. For these reasons, a healthy, long-term oil business, underpinned by a competitive fiscal framework and LNG project fiscal terms that also address AGIA issues, is required to monetize North Slope natural gas resources." AGIA refers to the Alaska Gasline Inducement Act, the 2007 state law under which the project is being considered.

Alaska's North Slope region holds an estimated 35 trillion cubic feet of proved natural gas reserves, most of it associated with the oil production that began in 1977. Some produced gas is used to power the more than two dozen oil fields there, but without a gas pipeline most is reinjected to help push more oil from the ground.

The letter to Parnell from Randy Broiles of ExxonMobil Production Co., Trond-Erik Johansen of ConocoPhillips Alaska Inc., John Minge of BP Exploration Alaska and Tony Palmer of TransCanada said the project concept today envisions an 800-mile, 42- to 48-inch diameter pipeline that would carry 3 billion to 3.5 billion cubic feet of gas per day. Some of that gas would be consumed in Alaska and some would be used to run the liquefaction plant and pipeline compressor stations.

The letter says the companies have assessed 22 sites along the Southcentral Alaska coast for location of the LNG plant and tanker port. It did not indicate a preferred site. As conceived, the LNG plant would use three parallel processing lines — called trains — of 5 million to 6 million metric tons each to superchill the pipeline gas to make it liquid for ease of transport.

The world's largest LNG plants — in Australia and Qatar — can make 15 million to 16 million metric tons of product annually. A plant planned for construction in Louisiana will be a little larger. The Gorgon plant under development in Australia is estimated to cost about $40 billion.

-By Bill White, Researcher/Writer for the OFC.

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