Walker touts AK LNG in Japan, responds to Exxon CEO

Photo/Courtesy/Gov. Bill Walker

Gov. Bill Walker is in Japan to wave Alaska’s flag at a big liquefied natural gas conference in Tokyo. A team of state officials accompanies Walker including Deputy Natural Resources Commissioner Marty Rutherford; Audie Setters, an LNG consultant to the state, and Walker’s communications director Grace Jang.

The meeting is the annual LNG Producers/Consumers Conference, one of the world’s largest and most influential LNG trade conferences, where Walker will speak Sept. 15.

Before the conference the governor and his team met with senior officials at Itochu Corp., a trading company; Japan Oil, Gas and Metals National Corp., a government agency that finances Japanese companies; Tokyo Electric Power Co., Japan’s largest electric utility, and Tokyo Gas, which serves seven cities in Japan and 11 million customers.

Walker was invited to make a presentation on Alaska’s gas resources and its planned large LNG export project at the LNG Producers/Consumers Conference. It will be a first time that a governor from the state has spoken at the conference, Walker said in a Sept. 11 press conference before departing to Asia.

Sen. Dan Sullivan, the former state resources commissioner, has previously spoken on Alaska’s gas potential but having the state’s governor invited to appear carries more emphasis, according to people familiar with the conference.

Walker said he is working mainly to raise Alaska’s profile as a source of reliable supply from a politically stable region and will not discuss any investments by Japanese or Korean firms in the Alaska project or any sales of LNG.

“That would be premature,” the governor said in the press briefing.

 Among companies Walker will meet with in separate sessions will be Tokyo Electric, and Tokyo Gas, two large LNG importers that purchased liquefied gas from the Alaska LNG export project for 40 years; Mitsubischi and Marubeni, large Japanese firms with a long interest in Alaska, along with Osaka Gas, KoGas, Korea’s national gas company and Japanese government institutions.

“We’ve met with most of these people before, but not on this basis (as the state’s chief executive). This is a chance to reestablish old relationships,” the governor said.

Rutherford, the DNR Deputy Commissioner, said she is talking about Alaska’s proven gas reserves in Japan. “In Prudhoe Bay and Point Thomson lie 33 trillion cubic feet of natural gas, and those are just the proven reserves,” Rutherford said in a statement issued Sept. 15.

She went on to promote the governor’s idea of expanding the pipeline diameter to be able to handle more capacity. “Upsizing the pipeline from 42 inches to 48 inches lowers the overall operating costs and increases deliverability for our customers,” she said.

Japan has one of the few steel plants in the world that are capable of manufacturing 48-inch high-strength, thick-wall pipe. There are no plants in North America with the capability, although there are plants that can make 42-inch diameter high-strength pipe.

The state’s partners in the gas project, North Slope producers BP, ConocoPhillips and ExxonMobil, are still considering the expanded diameter, however.

Walker said he doesn’t expect many questions about the current strained negotiations between the state and North Slope producers on agreements for the Alaska LNG Project. Customers in Asia will be mainly interested in the security and consistency of supply, to the point that the LNG price is almost a secondary issue.

“We’re certainly not at any kind of impasse in the negotiations,” the governor said. “Their biggest issue is the resource itself. The structure of how we get it there (the project) is not the focal point. Our big selling point is that we have a long history of honoring contracts and making shipments on time, a 40-year history. That’s a 5-star rating. Companies in Japan tell me that the price is not as important as deliverability, and that’s critical.”

Alaska’s other big advantage is that the gas is proven and in fact has been produced and reinjected many times by the North Slope producers to aid oil recovery. In contrast, there are risks with gas from other places, like shale formations of the Lower 48.

“Our gas is proven and that’s a huge advantage,” Walker said.

In reference to the current negotiations the governor lobbed a soft volley at ExxonMobil, the company leading the Alaska LNG Project. Responding to complaints made by ExxonMobil chairman Rex Tillerson in a natural gas trade publication about Alaska’s frequent changes of direction on the project, Walker said: “I know some companies are uncomfortable with what we’re trying to do, in taking a much more aggressive role in moving the project along. But we’re the second largest gas owner on the slope (after ExxonMobil) and we’ve got to start acting like an owner.”

In a question-and-answer article in Natural Gas Week, published by the Energy Intelligence Group, Tillerson cited major shifts in the state’s positions with each change of administration and election cycle.

This has been very disruptive, Tillerson said in the article.

“I have a long history with this, and I always tell every governor of Alaska, ‘You are not waiting on us. You are waiting on you,’” he said. “And every governor that comes in decides they’ve got a different way of doing this, which is why it never happens. You can’t take a project that is going to take five-six-seven years to execute and require $50 billion-$60 billion of capital and decide every two years you’ve got a different way to do it.

“We’ve had two good chances in the last 10 years to get it done, and as soon as you had an election that ended it. Alaska is their own worst enemy.”

Tillerson was also referring to former Gov. Sarah Palin’s detour from a partnership approach to a gas project to one led by an independent pipeline company, which failed, but he also had Walker in mind.

Walker said he had no apologies for his own efforts at changes to the project, although some of these, such as a possible late change in the pipe diameter, could delay the project moving into final engineering.

The governor also complained about the companies’ slowness in coming to grips with key issues in the negotiations. He didn’t cite ExxonMobil directly but did so indirectly. He said the process he inherited from former Gov. Sean Parnell is captive to the “slowest moving” partner in the project.

Walker said when asked who was moving slowest on the project “I’ve been very pleased with the pace of BP and ConocoPhillips,” in the negotiations.

He did not mention ExxonMobil.

Updated: 
11/24/2016 - 9:21am

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