Joint venture for marketing could solve one AK LNG issue
ConocoPhillips and Alaska’s state-owned gas corporation, Alaska Gasline Development Corp., say they are negotiating on a joint-venture organization to market North Slope natural gas as LNG.
ConocoPhillips is one of three North Slope producers and gas owners, along with the state through its royalty interest in gas.
The two are inviting BP and ExxonMobil, two other major slope gas owners, to join the group.
“ConocoPhillips has always supported joint-venture marketing, and we see this as a first step,” company spokeswoman Amy Jennings Burnett said.
ConocoPhillips and AGDC announced the signing of a Memorandum of Understanding at a major LNG conference in Singapore where Gov. Bill Walker also spoke.
The MOU will guide negotiations on formation of the joint-venture marketing group. In its statement AGDC said negotiations with potential LNG buyers will begin as soon as the organization is formed
The state corporation will take over management of the Alaska LNG Project from a four-party consortium of three slope gas producers and the state at the end of the year.
ExxonMobil, current project manager, is now completing preliminary engineering on Alaska LNG, which involves an 800-mile gas pipeline and large LNG export project.
The initiative for the new marketing group sidesteps a contentious issue that bogged down commercial negotiations last year among the four parties in Alaska LNG.
The group failed to reach agreement, due partly to strong opposition by ExxonMobil Corp., one gas owner, which said it prefers to market its gas and LNG on its own.
Joint-venture marketing is where a separate organization is formed to conduct marketing activities on behalf of its participants, who contribute their gas to a marketing pool. The other approach, favored by ExxonMobil, is where each company markets its own share of North Slope gas, in the form of LNG.
The advantage of the joint-venture approach, for the state at least, is that a new state gas marketing group need not be formed. The advantage for ExxonMobil in equity marketing is that the company already has its own strong LNG marketing group and wants the ability to supply customers, under a contract, with LNG from several sources, which provides substantial efficiencies for the company.
The state and ConocoPhillips supported joint-venture marketing and said so openly and BP supported the concept in the previous negotiations, although that shouldn’t be interpreted that BP will join a new marketing group.
BP and senior state officials, including then-Gov. Sean Parnell, traveled to Asia to promote Alaska gas sales. The trips were signals to the Asia market that the state was working with the companies on Alaska LNG.
The MOU also requires parties in the deal to work together to promote the Alaska LNG Project, which includes an 800-mile, 42-inch pipeline from the North Slope to Southcentral Alaska, a large gas conditioning plant on the slope and a large liquefied natural gas plant at Nikiski, near Kenai south of Anchorage.
A revised estimate completed this summer puts the construction cost at $45 billion. Exports of up to 20 million tons per year have been approved by the U.S. Department of Energy.