With the Arctic ice pack in meltdown due to global warming, it has only been a matter of time before companies would propose shipping North Slope gas, made into liquefied natural gas, or LNG, by sea rather than through a $43 million pipeline and LNG project in southern Alaska.
Now someone is proposing to do that – ship gas by tanker through the Alaska Beaufort Sea rather than an expensive 800-mile pipeline.
Dubai-based Lloyds Energy Co. is now studying the feasibility of direct shipments of liquefied natural gas from the North Slope to Asia, officials with Lloyds subsidiary Qilak LNG Inc. announced last Wednesday.
With an overland gas pipeline to southern Alaska apparently on the back burner Lloyds is the first to propose an alternative project in to ship gas from in ice-breaking tankers through the Beaufort Sea and Bering Strait.
“We’ve been trying to market North Slope gas by pipeline for 50 years and nothing has worked. It’s time to try something different,” former Alaska Lieutenant Gov. Mead Treadwell said in a press conference in Anchorage Wednesday. Treadwell is chairman and CEO of Qilak LNG, which is based in Alaska.
If the feasibility study is positive and the project moves ahead, an investment decision could come in 2022 and shipments of LNG could start as early as 2024, Treadwell said.
Lloyds Energy was formed in 2013 to develop floating LNG projects. One project the company is now engaged in, with Mitsubishi Corp. is an LNG-fueled 1,200 MW power plant in the Philippines.
For the Alaska project, ExxonMobil Corp. has signed a preliminary agreement to supply gas to an LNG plant from the Exxon-operated Point Thomson gas field east of Prudhoe Bay. David Clarke, Qilak Energy’s Chief Operating Officer, said in a briefing for reporters. Clarke said the gas volume is sufficient to allow the export of four million tons a year of LNG.
That would increase to 6 million tons a year if other gas owners at Point Thomson contribute gas, Clarke said. BP is the principal minority owner after ExxonMobil, the majority owner.
Point Thomson holds about 8 trillion cubic feet of gas and 200 million barrels of liquid condensate.
BP’s Point Thomson holdings are being sold to Hilcorp Energy, which is also buying BP’s share in the Prudhoe Bay field. Clarke said Qilak Energy hopes to negotiate a preliminary gas sales agreement with Hilcorp similar to one now held with ExxonMobil.
ExxonMobil is now operating a gas cycling and concentrate production project at the field, injecting produced gas back into the high-pressure reservoir and shipping the liquid condensate by pipeline 60 miles west to the Trans-Alaska Pipeline System.
The gas cycling and condensate project has been technically-challenged, however. Clarke said elimination of the gas injection by selling produced gas as LNG for export will allow ExxonMobil to maximize liquid concentrate output.
Treadwell said a preliminary feasibility assessment indicates than an Alaskan Arctic LNG project could supply LNG to Asia for about $1,250 per ton at 4 million tons per year, about half of $2,150 per ton of LNG for the proposed Alaska LNG Project, which must ship 20 million tons per year to be viable.
The shipping distance from an Arctic LNG plant to Asia via the Bering Strait is also about the same as from Cook Inlet, in southern Alaska, to Asia.
The location also has an advantage over the Yamal LNG project in Russia’s Arctic, which now ships LNG via a route across the top of Russia. “LNG tankers from Yamal must travel 2,600 miles to reach ice-free waters. From the North Slope the distance is 600 miles,” Treadwell said.
Clarke said Qilak Energy would have an LNG plant built on at a fabrication center in more temperate climates and move it to Point Thomson by barge in an open-water summer “sealift.” The plant would be positioned six to 10 miles offshore Point Thomson and supplied with gas by pipeline.
The company has identified one site north of Flaxman Island, northwest of Point Thomson, where bottom conditions are favorable for a construction of a structure to support the LNG plant, he said.
Winter ice in the Beaufort Sea is mostly first-year ice which is thin enough for navigation by icebreaking tankers similar to those used on the Yamal project, Treadwell said.
Clarke said the company would likely position an icebreaker off Point Barrow as a contingency. Point Barrow is a geographic feature extending out from the Alaska coast that is sometimes an impediment to shipping because of ice jams.