Alaska Plans $355 Million Liquefaction Facility to Support US-Asia LNG Trade

A mooring station for oil tankers can be seen at the Trans-Alaska Pipeline Marine Terminal in Valdez, Alaska on August 8, 2008. Credit: Reuters/Lucas Jackson

ANCHORAGE, Alaska (Reuters) – Alaska‘s governor will introduce legislation allowing the state to provide $355 million (221 million pounds) in seed money for a liquefied natural gas project that promoters hope will eventually ship North Slope natural gas to Asian markets.

Governor Sean Parnell said on Friday his plan is to provide state funding to help build a gas-liquefaction plant on the North Slope and a distribution system to bring LNG to the Fairbanks-area market. He proposes to authorize $275 million in bonds, to seek $50 million in direct general-fund appropriations and to allow $30 million in tax credits through an incentive program already in state law.

The plan envisions a North Slope liquefaction plant with an annual capacity of 9 bcf but expandable to 20 bcf, according to supporting documents provided by the governor’s office. The cost of that facility would be $220 million, said Sharon Leighow, Parnell’s spokeswoman.

LNG processed at the plant would be delivered by truck to Fairbanks, with a target date of late 2015 for first shipments, under the proposal.

Putting state money into a preliminary system delivering LNG to in-state markets could ultimately convince the private sector to follow through with a pipeline system allowing long-desired exports of North Slope natural gas, Leighow said.

“If you have the gas distribution system in place and you have the infrastructure and you have the customers, that helps when we get the gas line in,” she said.

Some of the governor’s plan will be embedded in the budget that he will unveil on December 14, Leighow said. The state legislative session starts on January 15.

Alaska‘s North Slope holds about 35 trillion cubic feet of proven natural gas and is believed to hold much more in undiscovered reserves. That natural gas has remained stranded on the North Slope, because any pipeline delivery system to deliver to markets has, so far, proved too costly and elusive.

State officials, after years of promoting an overland, 1,700-mile line to deliver natural gas to U.S. markets, have recently concluded that the domestic market is saturated with new natural gas and lacks room for an influx of Alaska supplies.

Officials are now pushing for an LNG project that would encompass an 800-mile pipeline carrying 3 bcf to 3.5 bcf a day from the North Slope to a southern Alaska port for delivery to Asia by tanker.

Such a project would be of “unprecedented scale and challenge,” energy companies studying its feasibility reported to the governor in October. The companies estimated it would cost $45 billion to $65 billion to build, not including construction of LNG tankers.

The cooperating companies are the three major North Slope oil producers – BP, ConocoPhillips and Exxon Mobil – and Canadian pipeline operator TransCanada Corp.

Those companies’ feasibility studies envision a liquefaction plant, but at a tidewater port in southern Alaska, not on the North Slope.

By Yereth Rosen, (Editing by Jonathan Weber and Doina Chiacu) (c) 2012 Reuters