AGDC, partners OK gasline budget; ExxonMobil only producer to not offer withdrawal agreement

The board of the state-owned Alaska Gasline Development Corp. voted unanimously Dec. 3 to approve a $75.6 million expenditure as Alaska’s 25 percent share of final preliminary engineering costs for the Alaska LNG Project.

The state is a one-quarter partner in the project with North Slope gas owners BP, ConocoPhillips and ExxonMobil.

Later in the day, the project partners voted to approve the total project spending of $230 million for the 2016 preliminary engineering budget.

Gov. Bill Walker had said previously that the state’s approval for Alaska LNG’s 2016 budget might be contingent on receiving an acceptable “withdrawn partners” agreement from the three producer partners.

Walker said Thursday afternoon that commitments on the agreement had been made by two companies, BP and ConocoPhillips, and that two out of three is good enough.

In a press release, Walker thanked BP and ConocoPhillips for committing to sign and make public a “Gas Availability Agreement” for their share of North Slope natural gas. The agreement will allow the project to move forward in the event that either company ends participation in the AK LNG project during the preliminary engineering phase, which is to be concluded in the first half of 2016.

“This is an historic milestone in the AK LNG project,” Walker said in a statement. “I am pleased that this agreement will be made public so Alaskans can better understand the project. Ensuring gas will be available to this gasline is a significant step in the right direction.

“I thank BP and ConocoPhillips for addressing the state’s concerns by agreeing to continue to negotiate mutually agreed and commercially reasonable terms under which their gas would be made available in the event either company does not proceed beyond pre-FEED. BP and ConocoPhillips have given us the assurances we need to move forward.”

There was apparently no letter from the third producer in the partnership, ExxonMobil. The governor did not comment on that.

The preliminary engineering, known as pre-front end engineering and design, or pre-FEED, will set the stage for a decision to move to final engineering, front end engineering and design, or FEED, by mid-2017.

Commercial agreements between the state and the industry partners must be concluded before the FEED decision is made and negotiations on those are ongoing.

Dave Cruz, acting board chairman of AGDC, said the state’s acquisition of TransCanada Corp.’s share of the LNG project made the state’s decision to support the completion of pre-FEED easier because the state would be representing its full one-quarter share on the project management teams rather than having to work through TransCanada on part of that.

“We’re now in a great position as a full partner to move this project forward,” Cruz said as the board meeting concluded. Cruz is owner of Cruz Construction, a longtime Alaskan firm.

12/03/2015 - 6:25pm