Alaska Gas Pipeline

New GTL Developments

noreply@blogger.com (AK Engineer) — Sat, 11 Feb 2012 20:28:00 +0000

Spending $40 billion for an Alaskan gas pipeline to the lower 48 seems less and less feasible every day. $20 billion for a short pipeline to Valdez plus another $20 billion for a LNG plant seems to offer only slight advantages over the big line. Other small pipeline options fail to monetize the the full volume of available North Slope gas.

It's always tempting to talk about Gas-To-Liquids (GTL) to convert Alaskan gas to petroleum products but the cost never seem to add up. I think this is because many GTL projects like Shell's Pearl convert gas to refined petroleum products (low sulfur diesel, kerosene etc). An Alaskan GTL plant only needs to convert gas into petroleum liquid in the C6 to C16 range, i.e. something liquid at atmospheric pressure and pumpable. Such a material could be blended with crude oil, moved down TAPS, and sold as crude oil.

Another factor working against GTL plants is size. Plant size drives up cost. The heart of a GTL plant is the Fischer-Tropsch reactor. The F-T reaction is exothermic (gives off heat) so reactor size becomes is dependent on effective heat transfer. An F-T reactor is fed by syngas produced by reforming natural gas. Some syngas plants require pure oxygen to form syngas. An expensive air separation plant must be built to supply the pure oxygen. An air separation plant adds both capital cost and operating cost.

What if the size and cost of a GTL plant could be reduced and a GTL plant could be customized to the needs of Alaskan gas? A new outfit is commercializing a technology that might just fit the bill. CompactGTL is scaling up a modular GTL technology that can convert Alaskan gas to synthetic crude oil at lower cost than other GTL processes. (LINK to CompactGTL presentation) Here are the advantages I see for the CompactGTL process:

1) Reduced reactor size. CompactGTL claims to have reduced reactor size by a factor of 10 through the use of mini-channel reactors. I believe in that claim. The mini-channel reactors integrate a reactor within a plate type heat exchanger. This type of heat exchanger provides very high heat transfer rate. CompactGTL has implemented this type of reactor for both the steam methane reformer (SMR) and the Fischer-Tropsch (FT) reactor. Size reduction will yield cost reductions.

2) No oxygen required. The CompactGTL process does not use an autothermal reformer therefore no costly air separation plant. That's a cost reduction.

3) No carbon dioxide separation required.Alaskan natural gas contains about 12% carbon dioxide (CO2). The CompactGTL process does not require CO2 removal. This reduces cost compared to pipeline alternatives.

4) Modular Design. Modular design suits Alaskan construction needs. Any gas line project envisions modularized gas treatment plants. Incremental deployment of CompactGTL using modules would take years and extend the oil production benefits of gas reinjection thus optimizing the total field production.

5) Synthetic Crude Oil. The CompactGTL process is geared to produce an unrefined product. That keeps cost low and options open. A synthetic crude could be blended with ANS crude or batched to Valdez. The product would be valued near the price of crude depending on the capabilities of the buyer's refinery. Note - a FT synthetic crude is not an exact replacement for crude oil, it lacks aromatics, the key ingredient of gasoline. On the plus side a FT synthetic crude lacks low value heavy cuts and troublesome sulfur. FT synthetic crude is ideal for clean diesel, kerosene and naphtha production. Converting Alaskan gas into a crude oil equivalent would forever break the market link to cheap shale gas.

6) Economics. CompactGTL shows one cost comparison in their presentation. Since they are currently focused on floating production, storage and offloading (FPSO) units I'll use that cost unescalated. i.e. "Alaska Factor" equals 1.00, I figure the cost of building a module on a ship will cost the same as deploying a module to the North Slope. Crunching those numbers I find that a full deployment of CompactGTL for Alaskan gas would cost upwards of $68 billon and it would produce about $15 billion annually in gross revenue if the product is priced at $100/bbl. The capital figure is 1.7 times higher than a gas pipeline but the synthetic crude product sells for 5 to 6 times the price of natural gas so that a BTU of North Slope gas could sell for 3.5 more if converted to liquids. These are of course very rough calculations, but the conclusion points in the right direction.

Other considerations

1) Timing. CompactGTL is currently in the commercialization phase with a demonstration plant funded by Petrobras. It will be some years before we're ready to talk deployment to a cold region. In those years I doubt the gas to liquids value ratio will change all that much. I also doubt that Alaska will ink a deal to sell gas as LNG into a market flooded with cheap shale gas and cheap shale gas derived LNG.

2) GTL Trend. The world is full of cheap gas and stranded gas. CompactGTL is only one of many outfits focused on converting stranded or wasted gas into useful liquids. Technological leaps in catalyst and reactor design may push GTL into full commercial in North America in the near future.

3) NGLs. Most urban Alaskan would like a big pipeline to deliver gas to their homes at an affordable price. That may never happen and Alaskans need to make other plans for in-State energy needs. A GTL plant does not exclude the possibility of propane and butane (NGLs) recovery from North Slope gas upstream of a GTL plant. The economics of a GTL plant is not dependent of the BTU content of the feed gas, so a GTL plant would not compete with the interest of supplying Alaskans with affordable home-grown energy from NGLs.

ASAP Draft EIS Available

noreply@blogger.com (AK Engineer) — Sat, 04 Feb 2012 18:17:00 +0000

The draft environmental impact statement is available: (LINK)

AGIA Spending Report

noreply@blogger.com (AK Engineer) — Sun, 29 Jan 2012 14:36:00 +0000

The Alaska Department of Revenue and Department of Natural Resources submitted a report on expenditures on the Alaska Gasline Inducement Act (AGIA) (LINK). The report includes details of spending to date and forecast of future spending.

Here's the simplified version:

What's absent from the report (1) The report indicates that no money has been spent to date on the LNG option, but tosses in $35,696,000 for LNG and other contingencies, and (2) There no real substance in terms of results. (3) There's no breakdown of spending East of Delta Junction, i.e. if the LNG option goes through how much AGIA spending was wasted?

The report does break out percentages spent in Alaska and Canada. I estimate the Delta Junction to Canadian border spending equals about 8% so that 40% of AGIA spending can be tacked on to the cost of any LNG option.

The Next Alaska Movie

noreply@blogger.com (AK Engineer) — Sat, 28 Jan 2012 17:40:00 +0000

The Alaska Dispatch ran a story on five worst Alaska themed movies (LINK). I'm sure you'll be excited to learn another great tale of the North is in development.....

I don't want to give too much away, but it's the gripping tale of one state's struggle to bring natural gas to market. There's excitement: An earthquake, a tsunami, snow, more snow, explosions and the daring rescue of sea mammals.There's a tender love story as stakeholders tearfully embrace mountains of cash. There's drama when greedy markets confront their addiction to cheap shale gas. Coming to the bargain DVD bin soon!

Rigging Down on Low Gas Prices

noreply@blogger.com (AK Engineer) — Fri, 27 Jan 2012 17:40:00 +0000

This week shale gas champion Chesapeake Energy announced that they are backing off dry gas drilling and production. Quote:

Chesapeake Plans to Reduce its Operated Dry Gas Drilling Rig Count to 24 Rigs, a Decline of Approximately 50 Dry Gas Rigs from its 2011 Average Operated Dry Gas Rig Count.

Chesapeake Plans to Curtail its Gross Operated Gas Production by up to 1.0 Bcf per Day and Plans to Defer New Dry Gas Well Completions and Pipeline Connections Wherever Possible

This isn't anything new. Chesapeake has "deferred" production before when the price dips below $4/MMBTU. The graphic below shows the gas price over time with a sales volume bars on the left. You'll note the actual volume of transactions is in the $4.00 to $4.40 / MMBTU range. There's virtually no incentive to drill for dry gas at today's insanely low prices.

I view the Chesapeake action as further validation the $4/MMBTU is the long term support level for lower 48 natural gas. Overall gas rig rates are down 14% from a year ago (791 now vs. 906 last year). We'll soon learn if $4/MMBTU less transportation cost of $1.5/MMBTU can support an LNG plant in Alaska.

More Lower 48 LNG Exports

noreply@blogger.com (AK Engineer) — Sat, 21 Jan 2012 20:31:00 +0000

The idea of lower 48 LNG exports is becoming a reality. A few months back Cheniere start the trend. I made this prediction last November:

What's next? - I assume the Cheniere business model is a good one and similar import terminals with the right ingredients will follow suit. See page 38 of the Cheniere presentation (LINK) for plant volumes.

This week the Department of Energy authorized Sempra to export LNG from the Cameron Parish Site (LINK), and quote:

HOUSTON -(MarketWatch)- The U.S. Department of Energy said Friday it has authorized Cameron LNG to export liquefied natural gas, opening the door wider for U.S. natural gas companies to send their bounty overseas.
The export permit is only the third awarded in the U.S. It allows Cameron, a wholly-owned subsidiary of California-based natural gas distributor and marketer Sempra Energy, to ship up to 1.7 billion cubic feet a day of LNG from its in Cameron Parish, La., facility to countries possessing free-trade agreements with the U.S.

Here's a list of existing North American LNG import terminals with my analysis of proximity to shale gas (including the pipeline infrastructure to move the shale gas) Note, this table does not include the 2.8 BCFD proposed Gulf Coast LNG Terminal, Brownsville Texas:

The plan to convert LNG import terminals into an export terminals make sense for terminals located near shale gas fields and adequate pipelines. By this analysis there's good potential for four more new export terminals. Two of those potential sites are controlled in part by Alaskan North Slope producers. I say this to illustrate the business decision before the producers: Build liquefaction units at existing lower 48 import facilities -or- build a North Slope gas treatment plant, a $20 billion pipeline to Valdez, and a liquefaction at Valdez. Obviously the Alaska LNG option is pointless unless North Slope gas is priced at a deep discount to Henry Hub. How deep? To defer the cost of $20 billion gas line to Valdez North Slope gas needs to sale for $1.50/MMBTU less than Henry Hub (based on a discount cash flow over 20 years at 5%).

Now this isn't all bad news. In the best case scenario the four import terminal near shale gas listed above are all converted to LNG export pushing the Henry Hub price of gas up into the $5 or $6/MMBTU range. At that point in time Alaskan gas will not need to compete with the low capital cost of import facility conversion and the deep discount will not be a factor. In the mean time it's important to remember the North Slope producers can sell LNG from lower 48 import terminals for less cost compared to building an pipeline to Valdez.

Prediction - expect more announcements of lower 48 LNG import facility conversion to export.

For more information on the effects of LNG export see the EIA report (LINK), and

Brookings Institution study on exporting LNG from the United States (LINK)

Nova Gold Donlin Feasibility Study Complete - Includes Gas Line

noreply@blogger.com (AK Engineer) — Mon, 16 Jan 2012 17:20:00 +0000

Another milestone for gold mine developer Nova Gold. The Donlin feasibility study is complete (LINK). According to the new release NovaGold will power the mine with gas (LINK). Quote:

The capital cost of $6.7 billion, which was approximately $300 million lower than the guidance provided in September 2011, now includes the construction of a 500-kilometer natural gas pipeline that, at a cost of approximately $1 billion, which would deliver natural gas from the Cook Inlet to the mine site, and $984 million of contingencies. The change to utilizing natural gas was previously described as an upside case for the updated feasibility study. Its confirmation of viability is indeed an important modification that is believed to improve numerous project parameters including lowering operating costs; improving environmental management and social
infrastructure; providing flexibility for future operational modifications; and facilitating potential increases in the scale of operations in this geologically prospective district. The Company believes that the long-life nature of the Donlin Gold Project offers the potential to lower the capital expenditures through long-term off-take with third-party providers, including supply of natural gas. The Company now anticipates the Project permitting to commence in the first half of 2012.

From the NovaGold website this nugget (LINK), Quote:

Natural gas will be delivered to site by a 500-kilometer-long 12-inch-diameter pipeline. It will serve as the energy source for on-site power generation. This natural gas pipeline is a lower-cost alternative to the previously considered barging of diesel fuel. Operating costs include importing liquefied natural gas (LNG) by ship to Anchorage and total delivery costs to site which includes ship based regasification of the LNG and delivery from Anchorage to the Donlin Gold project via the pipeline. There may be an opportunity in the future to source natural gas from within Alaska.

Maybe this gas line is GO. I'm still hunting a link to the actual study, I'll post a link when I find it. (UPDATE - Found the file. Go to LINK then click on "View this company's public documents" and search for "Technical Report (NI 43-101)" dated Jan 12 2012). (Better link on the company website LINK).

Sounds like the NovaGold study is based on $13.33/MMBTU LNG from outside Alaska with the possibility of obtaining gas from within Alaska at some point in the future. Their approach is a good one - Project cost are independent of the outcome of the larger Alaska Gas Pipeline debate / projects.

Good luck NovaGold - Best wishes for a safe and productive project.

Alaska Pipeline Project - FERC Filing

noreply@blogger.com (AK Engineer) — Sat, 14 Jan 2012 21:03:00 +0000

LINK to Alaska Pipeline Project draft resource report:

Three & One

noreply@blogger.com (AK Engineer) — Fri, 06 Jan 2012 22:11:00 +0000

Yesterday Alaska's Governor Sean Parnell met with the CEO's of ExxonMobil, BP, and ConocoPhillips to talk about commercialization of North Slope gas, boosting Alaskan oil output and Point Thomson.(LINK to Governors press release), and the agenda:

It's not a kumbaya moment yet, but I'll give the Governor and the CEOs credit for manning up and doing the adult thing, i.e. start talking about the issues that are stalling development of oil and gas in Alaska. This group should talk more often. Quote from the Governor:

“I appreciate the willingness of the chief executives to come to Alaska to discuss the important topic of commercializing North Slope gas,” Governor Parnell said. “For a gas project to advance, all three companies need to be aligned behind it. This meeting is an important step, but much work remains.”

Nice work Governor, don't let up.

2011 - Year of the Yawn

noreply@blogger.com (AK Engineer) — Sat, 31 Dec 2011 16:07:00 +0000

I had greater expectations for the Alaska Gas Pipeline in 2011. To recap -

The open season process was expected to yield announcements of precedent agreements for long term commitments to ship gas. The agreements may or may not have been reached, but no public announcement was forthcoming. Chances are any agreements reached are so heavily conditioned that they represent no commitment to do anything in the here and now.
In 2011 I expected a viable shipper for a 7 MMTPA Valdez LNG plant to step forward. What actually happened was that Governor Parnell voiced support for a tidewater LNG project. The Governor's comments had the unintended consequences of delaying submission of resource reports by the Alaska Pipeline Project (TransCanada and ExxonMobil).
2011 Started with two Alaska Gas Pipeline projects - The APP (TransCanada & Exxon Mobil) working to the scope as defined by the Alaska Gas Inducement Act (AGIA) and The Denali Project (ConocoPhillips & BP). I had an expectation that the projects would merge in 2011. Instead Denali folded in May citing "open season efforts have not resulted in the customer commitments necessary to continue work on its Alaska North Slope gas pipeline project".

What's next? - for starters spot Henry Hub gas closed the year at $2.97/MMBTU (see chart for 2011 natural gas prices). That's astonishing and sobering to any proponent of an Alaskan Gas Pipeline. Gas that cheap in December is partially due to a mild lower 48 winter but mainly a function of the glut of shale gas. The 200 day average price is right at $4/MMBTU - essentially the low profit range to drill and produce a shale gas well.

In 2012 the North American gas markets will have little appetite for Alaskan Gas. Billions will be spent to build Gulf of Mexico LNG export capacity and preliminary studies will be launched to look into the viability of at least one lower 48 Gas to Liquids (GTL) plant. Anti-fracking stories will continue with little effect on the continued development of lower 48 shale gas resources. The annual average price of 2012 gas may fall within the $3.50 - $5.00/MMBTU range. No new nuclear power will come on line in 2012, but a few gas fired plants will come on line to replace aging coal plants.

Throughout 2012 Alaskans will come to grips with the increasing unattractiveness of Alaskan Gas. The best comment this year came from Steve Kirchhoff, Vice President – Americas, ExxonMobil Gas and Power Marketing Company in a presentation to the Resource Development Council of Alaska in this video. In this presentation Kirchoff states that "You can't dabble at LNG"

Shale Gas Apocalypse* - Ending?

noreply@blogger.com (AK Engineer) — Sat, 17 Dec 2011 17:18:00 +0000

What would it take to end the shale gas apocalypse* ? Maybe a ton of new laws constraining shale gas development and destroying thousands of good paying jobs, or maybe.....Monetize and export shale gas as LNG, and convert shale gas to liquid fuels.

I favor LNG exports and gas-to-liquids (GTL) for three reasons - Jobs building LNG export plants, Jobs building GTL plants and Jobs building the Alaska Gas Pipeline.

It's one thing for this lonely blog to promote the idea but the industry is beginning to take advantage of abundant, cheap shale gas.

Today we have news that LNG company Cheniere is planning a second LNG export plant near Corpus Christi Texas (Rigzone Link) (Marketwatch Link) RigZone quote:

Cheniere Energy announced Friday that its wholly owned subsidiary, Corpus Christi Liquefaction is developing a liquefied natural gas (LNG) export terminal at one of Cheniere's existing sites that was previously permitted for a regasification terminal. The LNG export terminal site is located in San Patricio County, Texas , and it is anticipated that the terminal would be primarily supplied by reserves from the Eagle Ford Shale, located approximately sixty miles northwest of Corpus Christi . The proposed liquefaction project ("Corpus Christi Project") is being designed for up to three trains capable of producing in aggregate up to 13.5 million tonnes per annum (mtpa).

The combined export volume of the Cheniere export projects will equal about 4 BCFD which is about 88% of the capacity of the Alaska Gas Pipeline. What's great about the LNG export terminals and GTL plants is that they represent new demand. The scale of these projects is large enough to move markets and increase the gas price, hopefully into a long term stable range that will promote the Alaska Gas Pipeline.

*(my term for super low natural gas prices caused by lower 48 shale gas production)

Rep. Mike Chenault, Comments on Gas Line

noreply@blogger.com (AK Engineer) — Fri, 16 Dec 2011 22:47:00 +0000

No really news or hope from Rep. Mike Chenault, Speaker of the House of Representatives: (LINK to video).

Skip forward to the 13:40 mark for talk about gas lines. Glimmer of hope: Donlin Creek. Favorite quote:"Gotta have a buyer, Gotta have a Seller".

More Gulf Coast LNG Sold

noreply@blogger.com (AK Engineer) — Sun, 11 Dec 2011 17:30:00 +0000

Cheniere Energy Partners has signed another deal to export LNG from Sabine Pass - this time to the Indian utility company Gail, (LINK) and quote:

State-owned gas utility GAIL India today said it has signed an agreement to buy 3.5 million tonnes a year of LNG for 20 years from a US firm to meet India's growing energy needs.
"GAIL has signed a Sales and Purchase Agreement (SPA) for supply of LNG over 20 years with Sabine Pass Liquefaction, LLC, a subsidiary of Cheniere Energy Partners, LP, USA for supply of 3.5 million tonnes per annum of LNG," the company said in a press statement here.

Supplies may start as early as 2016."Under the SPA, GAIL will pay Sabine Liquefaction as per contractual provisions on a Henry Hub (US gas benchmark) basis after transfer of custody on FOB. LNG will be loaded onto GAIL's vessels," it said.The SPA has a term of 20 years commencing upon the date of first commercial delivery, and an extension option of up to 10 years.

It's interesting to note that the price of LNG under this agreement is indexed to Henry Hub vs. WTI or Brent crude. That indicates that the buyer believes in long term low Henry Hub prices and sought to de-link their gas price from crude. For Cheniere, indexing to Henry hub allows them to operate the plant and collect a predictable margin regardless of variations in the crude market.

Of course this is all very interesting for Alaskans. First - Exporting lower 48 shale gas as LNG is a good thing because it builds support and stabilizes demand for L48 gas. Second - it shows that long term LNG deals are possible, but the terms of the agreements have to be smart and fair to both parties. Third - I'm interested to see announcements of LNG export deals vs. announcements of new combined cycle power plants. The export market may beat domestic power producers to the punch.

ConocoPhillips - LNG Makes Sense for Stranded Gas

noreply@blogger.com (AK Engineer) — Sat, 10 Dec 2011 01:59:00 +0000

ConocoPhillips is busy around the world with new LNG projects. According to this article (LINK) Australia is first in ConocoPhillips mind but they are looking at potential projects in the US and Canada. Quotes:

ConocoPhillips is studying North America's potential to export natural gas, but it isn't high on its priority list and any rush to build terminals on the U.S. coast could face opposition from Washington, Al Hirshberg, the company's Senior Vice President, Planning and Strategy, said Thursday.

"I just don't see it," Hirshberg said. "Five years from now Queensland will be a major spot on the map, as well as Western Australia in terms of LNG export, and the U.S. Gulf coast won't be, that's my prediction."

"Canada's a little different," he told Dow Jones Newswires in an interview. "The gas in Canada is stranded, it really doesn't have access to a market so spending the money to liquefy it and get it ready for export is going to make long-term sense."

Similar logic may apply to stranded Alaskan Gas. Probably not, but exportation of other gas plays helps build price stability which in turn helps the prospects of the Alaska Gas Pipeline.

Shell, Shale, and GTL

noreply@blogger.com (AK Engineer) — Fri, 09 Dec 2011 18:08:00 +0000

Cheap shale gas in the lower 48 is attracting the attention of LNG exporters (LINK) and now Shell is looking at building a large Gas-to-Liquids (GTL) plant in the United States. (LINK). Quote (link and highlights added):

By JAMES HERRON Royal Dutch Shell is in the early stages of planning projects to turn natural gas into fuels like diesel in the US, of similar scale to its huge project in Qatar, Andy Brown, executive vice president of Shell, said in Qatar Monday. "We are looking for places where gas is cheap and [oil] products are expensive," he said at a press briefing at the World Petroleum Congress in Doha, Qatar. "Clearly the US is something we're looking at." Shell is only interested in large-scale projects similar to the $18 billion Pearl gas-to-liquids plant it has developed in Qatar, Brown said. The first phase of Pearl GTL is now producing at close to full capacity and the second phase started over the weekend, he said.

What can an $18 billion investment yield? According to the Shell website Pearl converts 320,000 BOE of gas into:

- 140 kboe/d of gas-to-liquids products (2 trains)

- 120 kboe/d of natural gas liquids and ethane

At today's prices I estimate that's equal to about $8.5 billion in gross annual product revenue. The 1.8 BCFD of gas feed stock would cost about $2.5 Billion leaving a gross margin of $6 Billion. Assume operation, maintenance and utility cost of $1 Billion and a Pearl type GTL plant will yield $5 billion annually EBIT. After taxes the rate of return is in the attractive range. I assume the capital cost in the lower 48 will be higher than Qatar, so the rate of return is probably in the 12% to 15% range.

How does this relate to an Alaskan Gas Pipeline? First don't get your hopes up for Shell to build a world scale GTL plant in Alaska - construction cost are much higher than the lower 48 and the pipeline infrastructure is already in place on the Gulf Coast. A lower 48 GTL plant of this scale does help Alaska - it soaks up 1.8 BCFD of gas, roughly 40% of the 4.5 BCFD capacity of the Alaskan Gas Pipeline. Keep in mind GTL is expensive, but outfits like Shell can buy gas at $3.5/MMBTU and sell liquid products at $16/MMBTU. There's also the possibility that more lower 48 GTL plants will be built and the gas demand could easily exceed the volume of the Alaska Gas Pipeline.

Ultimately sponging up cheap lower 48 shale gas with GTL plants and LNG export plants will help create demand for Alaska's gas.

NovaGold - LNG Imports

noreply@blogger.com (AK Engineer) — Wed, 07 Dec 2011 01:54:00 +0000

NovaGold has completed the updated feasibility study for the Donlin Creek project. It's good reading and looks like a great project if it gets funded. Alaska Gas angle - The project will build a 300 mile 12" diameter gas line to transport gas from the Anchorage area. The project will depend on gas from IMPORTED LNG. (LINK) and quote:

Natural gas will be delivered to site by a 500-kilometer-long, 12-inch-diameter pipeline. It will serve as the energy source for on-site power generation. This natural gas pipeline is a lower-cost alternative to the previously considered barging of diesel fuel. Operating costs include importing liquefied natural gas ("LNG") by ship to Anchorage and total delivery costs to site which includes ship based regasification of the LNG and delivery from Anchorage to the Donlin Gold project via the pipeline. There may be an opportunity in the future to source natural gas from within Alaska

I read this as LNG gas plus a small pipeline is the baseline cost that doesn't depend on other projects. They can always switch to Alaskan gas when and if that becomes available. If the project goes forward it would make a great anchor customer for some of the proposed Alaskan gas pipeline projects.

Gas Off-Take Study Available on line

noreply@blogger.com (AK Engineer) — Fri, 02 Dec 2011 13:25:00 +0000

Gas Off-Take Study by engineering firm Black and Veatch is available on line (LINK).

Additional presentations are available on the Alaska Gas Pipeline Project Office website (LINK)

Natural Gas - Growth, Growth, Growth

noreply@blogger.com (AK Engineer) — Wed, 30 Nov 2011 01:15:00 +0000

November 16, 2011 ExxonMobil Presentation Alaska Resource Development Council (LINK)

Quote from page 8:

Alaska North Slope Gas is competing in a growing & increasingly global marketplace
• Resource development underpins economic growth for State
• Complexity of Alaska gas development dictates need for on-going stakeholder alignment
• Alignment with the State of Alaska
• Establish predictable and durable fiscal terms so an investment of this magnitude can be made
• Build on foundation of the Alaska Pipeline Project and AGIA framework
• Alignment among Producers
• Support from ExxonMobil, ConocoPhillips and BP essential
• ExxonMobil is poised to work with all key stakeholders to shape the next generation of North Slope development

LINK to Video of the presentation.

All true, but no Kumbaya moment yet.

Listening to the presentation I heard a hint of buy in for Alaskan LNG, or at least a pitch that ExxonMobil has what it takes to succeed at an Alaskan LNG project.

Gulf Of Mexico LNG - Pre-Sold

noreply@blogger.com (AK Engineer) — Sat, 26 Nov 2011 21:11:00 +0000

Cheniere is gearing up to convert its Sabine Pass LNG plant into an export terminal, converting cheap lower 48 gas into LNG. Here's news (LINK) of Cheniere pre-selling 3.5MTPA of LNG to Gas Natural Aprovisionamientos, a subsidiary of Gas Natural Fenosa.

The contract runs for 20 years with an option of an additional 10 years.This agreement follows a simlar agreement with BG (LINK) inked in October.

I mention the Cheniere because it has all the ingredients that the various Alaskan gas projects are missing. 1) Cheap gas at tidewater, 2) some pre-built facilities, and now 3) Customers.

What's next? - I assume the Cheniere business model is a good one and similar import terminals with the right ingredients will follow suit. See page 38 of the Cheniere presentation (LINK) for plant volumes. Lake Charles and Golden Pass have high volumes and plenty to gain by adding export capabilities.

As Gulf of Mexico LNG exporters come on line the price of gas will climb - maybe into that $6.00/MMBTU sweet spot that will promote development of Alaska's stranded gas resources.

Best use of Shale Gas - Export it

noreply@blogger.com (AK Engineer) — Wed, 16 Nov 2011 09:26:00 +0000

Cheniere project moving forward to export lower 48 shale gas (LINK).

The cost: $5 Billion for two trains producing a total of 9 million tons per year.(LINK2)

You can use the unit rate to estimate the cost of an Alaskan LNG export plant. The Cheniere volume is roughly 25% of the proposed Alaska gas line volume. Add "Alaska" factors and you find that $25 billion is need to build the plant that could export the full 4.5 BCFD of Alaska gas. That's on top of the pipeline cost.

New Gas & New Jobs

noreply@blogger.com (AK Engineer) — Sat, 12 Nov 2011 12:06:00 +0000

The Alaska Dispatch has this article by Amanda Coyne on the release of the Point Thomson EIS (LINK)(Point Thomson EIS Link).

There's no point in developing Point Thomson unless you believe in a future Alaska gas pipeline.

Follow the money - a producer (ExxonMobil) is spending real money with an expectation of a real return on investment.

Real jobs are being created too. Check out "Careers" at Fluor. Recent job postings mention Point Thomson by name.

Alaska LNG - Back in the news

noreply@blogger.com (AK Engineer) — Sat, 29 Oct 2011 13:35:00 +0000

Governor Sean Parnell has taken a position on an Alaska Gas Line option - LNG. From ADN (LINK):

Parnell, in a speech to an oil and gas industry group in Anchorage, said he wants the major North Slope players - Exxon Mobil Corp., BP and ConocoPhillips - to coalesce behind a project that would allow for liquefied natural gas to be shipped overseas. He wants them to do this under the framework of the Alaska Gasline Inducement Act. If they do, the state can be flexible, including talking tax and royalty terms, he said.

Also see Amanda Coyne's Alaska Dispatch article (LINK)

LNG to tidewater is not a new idea. It's an option included in the Alaska Gas Inducement Act (AGIA). What is news is the the Governor can't envision how Alaska Gas will ever compete with abundant lower 48 shale gas. Of course the public is not in the loop on the facts and figures but it's believable when you look at the capital cost, the taxes and the low price of lower 48 shale gas.

The big news in his statement is "the state can be flexible, including talking tax and royalty terms". Wow! This is the one area under the State's control. Getting back to the economics - Lower 48 LNG import facilities are considering conversion to exporting. An Alaskan LNG export facility will need to compete with those projects so the Governor is going to have to be extremely flexible. Politically this may be the only option with a chance. The All-Alaska aspect of the plan should resonate with the voters, especially when it supplies affordable fuel to so many along the route.Alaska's competition in the Lower 48 is busy lining up customers and cutting deals (LINK: Cheniere lands customer for LNG export).

Is this just an empty challenge? Let's hope not. I'd like to think that the option is thoroughly vetted and in the realm of the possible for the State and the producers. There's always one element missing from announcements on Alaska's LNG plans - a BUYER. I'll hold my applause for Governor Parnell until he makes a LNG announcement with a producer CEO and an Asian buyer CEO standing close by.

Even more LNG for Kitimat

noreply@blogger.com (AK Engineer) — Sun, 23 Oct 2011 21:09:00 +0000

While Alaska continues to jaw about gas lines and LNG (TIM BRADNER LINK) / (BILL WALKER LINK), the Canadians are all in. For the second week in a row we have news about LNG projects at Kitimat (KITIMAT LINK).

+1 Canadian LNG, -1 Alaska LNG

noreply@blogger.com (AK Engineer) — Sun, 16 Oct 2011 15:58:00 +0000

This week ConocoPhillips purchased Marathon's share of the Kenai LNG plant (LINK) and the Kitimat B.C. LNG project received an export license (LINK). The Kenai plant is scheduled to be mothballed and may be converted to and IMPORT terminal.

Neither of these news items are new or shocking, but the stories illustrate Alaska's ongoing failure to compete in gas markets. One upside, maybe someday Kitimat will export LNG to the Kenai terminal.