Despite a world awash in liquefied natural gas, Alaska is still at work on its $40 billion-plus Alaska LNG Project, which, if built, could deliver 20 million tons a year of LNG to world markets that seem to have plenty of the stuff.

State officials engaged with the project, however they say they are under no illusions about current LNG markets, which have ample supply. Their goal is to get the project buttoned-up in terms of licensing and permits, and to get an updated cost estimate, so the big project is ready to go if markets turn around.

Joe Dubler, CEO of the state-owned Alaska Gasline Development Corp., or AGDC, briefed legislative committees in Juneau last week on the status of the project.

ExxonMobil and BP are still contributing to the ongoing work under a cost-sharing agreement, Dubler said.

The budget is sharply pared back to about $15 million being spent this year mostly on licensing work with the Federal Energy Regulatory Commission, Dubler said. BP and ExxonMobil, who are major North Slope gas owners, are picking up two-thirds of the tab with AGDC is paying the other third. The state is also a major gas owner through its royalty share of gas reserves.

AGDC now expects a draft Environmental Impact Statement to be issued by FERC in March, Dubler said.

Typically a final Environmental Impact Statement comes a month later, and a Record of Decision and the FERC license is expected in June. That would give the project the bulk of its needed federal and state approvals as well as rights-of-way across federal and state lands for the 800-mile corridor for a 42-inch pipeline built from the North Slope.

The pipeline would be built to a LNG plant on the south Alaska coast.

Having these approvals is a big gain in “de-risking” the project because many global energy projects, for plans for pipelines from Alberta to the British Columbia coast, have gotten bogged down in local opposition and delays in government approvals. “We’re finding that investors will not tolerate regulatory risks,” Dubler said.

On another level, AGDC along with BP and ExxonMobil, have contracted with Fluor to update a 2015 cost estimate for the project. That is expected in March, Dubler told the legislators. The work in 2015 was to develop a pre-Front End Engineering and Design, and was led by ExxonMobil with all three major North Slope producers including ConocoPhillips and the state helping fund $600 million for the work. It resulted in a $43 billion estimate.

Since then, the state, with ExxonMobil and BP, but without ConocoPhillips, have been working on ways of reducing costs with part of it through increased modularization, or building major plant components off-site and moving them to Alaska rather than fabricating on-site, which drives up labor costs, Dubler said.

It has always been planned that the large gas treatment plant that would be needed on the North Slope to remove carbon dioxide would be built in large modules and barged to the slope, but plans for the LNG plant in south Alaska were for on-site construction. That will probably change now, he said.

Also, a review of project costs in mid-2019 led by ExxonMobil and BP found that 2015 construction plan, with its $43 billion estimate, was “top heavy” with project management, Dubler said.

“If we can get costs down to where we have a viable project we should have no problems attracting investors,” Dubler said.

About 35 trillion cubic feet of gas has been discovered and confirmed on the North Slope over the years, most of it associated with large oil finds. The gas owners have worked for decades on various plans to commercialize the gas but the biggest hurdle has been the cost of the 800-mile pipeline to move the gas south to a coastal LNG plant.

Recently, Qilak Energy, an Alaska subsidiary of Dubai-based Lloyds Energy, began conceptual studies for an offshore North Slope LNG plant that would use ice-breaking tankers to move liquefied gas through the Beaufort Sea, where the ice pack is shrinking, to markets in Asia via the Bering Strait.

Qilak is working with ExxonMobil, owns substantial gas reserves at the Point Thomson, which is near where Qilak would built its plant.

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