Parnell wants to take a new look at LNG

The gas pipeline plan may be shifting from Canada to an LNG project in southern Alaska. Gov. Sean Parnell called on North Slope producers and TransCanada Corp. to reexmine the LNG option in light of low gas prices in the Lower 48 states and the buildup of gas supply from shale gas producers.

In a speech to the Alaska Oil and Gas Association’s annual meeting Oct 27, Parnell said there is little progress to date on TransCanada’s current plan for a pipeline to Alberta, from where gas could be shipped on to the Lower 48. However, markets for LNG in Asia are strong, and the governor wants a new look at that. Various companies including North Slope producers and TransCanada have looked at LNG and exports to Asia over the years.

The state is in a contractual relationship with TransCanada under the state’s Alaska Gasline Inducment Act, or AGIA, to support the pipeline company’s current effort on a 48-inch pipeline from the North Slope to Canada. TransCanada and ExxonMobil are in a separate relationship to do engineering and feasibility work on the pipeline to Canada, which is expected to cost in the range of $40 billion.

Parnell did not commit on any additional state financial support for a pipeline to an LNG project other than $500 million already committed to TransCanada under the AGIA contract, but he did say that he would be open to a tax agreement on gas production this year, in time for the Legislature to consider in 2011, if TransCanada and the North Slope producing companies could agree to pursue an LNG project.

In a statement, TransCanada said, “TransCanada, as the licensee under AGIA, has regular conversations with different levels of the state administration on matters pertaining to the Alaska Pipeline Project. Those discussions are held in confidence under the terms of the license. TransCanada is continuing its efforts to advance the Alaska Pipeline Project to successfully transport North Slope gas to market,” the statement said.

In his comments, Parnell said, “It’s my impression that TransCanada and the producers are looking for something different, because there’s no forward movement on the pipeline to Canada. It appears the market has shifted,” adversely in North America, because of shale gas.

“I have communicated to TransCanada, ExxonMobil, BP and ConocoPhillips the frustration that Alaskans have with the lack of progress, and I want to send a signal that if the producers and TransCanada want to take a hard look at LNG, we are flexible and will support that,” the governor said.

As part of an open season held by TransCanada in mid-2010 under the AGIA contract the pipeline company offered prospective shipped the option of a 36-inch pipeline alternative to an LNG project at Valdez, in south Alaska. TransCanada said it did get offers from shippers in the open season but would not say whether the offers were to send gas to Canada or Valdez.

Since 2010, however, TransCanada vice president Tony Palmer has said that the company’s efforts are focused on the pipeline to Alberta, and not to an LNG project in Valdez.

Parnell did not specify any preference for a pipeline to Valdez or to the Kenai Peninsula south of Anchorage, where there is an existing small LNG plant owned by ConocoPhillips. Separately, the state is backing engineering work on a 24-inch gas pipeline from the North Slope to southern Alaska if the 48-inch pipeline to Canada is not built.

There is speculation in Alaska that the governor may push for the two projects to be merged, with a 36-inch pipeline built to the Kenai Peninsula. ConocoPhillips is currently planning to mothball its plant at Nikikski, near Kenai, partly because of a lack of gas supplies from Cook Inlet producing fields.

If gas were brought from the North Slope the plant would have to be expanded and upgraded.

11/10/2016 - 10:06pm