North Slope producers update Parnell, legislators on gas pipeline

North Slope producers have provided a few more details of their plans for a large Alaska gas pipeline and liquefied natural gas project and briefed state legislators in Juneau Feb. 19.

In his State of the State address to the Legislature in January, Gov. Sean Parnell had requested a progress report from producers BP, ExxonMobil, ConocoPhillips as well as TransCanada Corp. a pipeline company.

Much of what was in the letter sent to Parnell Feb. 15 has been known, but the companies added important new details, including that a 42-inch pipe diameter has been decided on. Also, the acreage needed for a liquefied natural gas (LNG) plant at the southern end of a gas pipeline was larger than the acreage in a project outline issued last October.

Many other details of the project have also been settled on, but not the proposed location of the LNG plant, a matter of considerable interest to Parnell and legislators.

The letter to Parnell also reinforced earlier comments that changes in the state’s oil and gas tax structure would be needed to make the project possible.

“As outlined in our letter of Oct. 1, 2012, a competitive, predictable and durable oil and gas fiscal environment will be required for a project of this unprecedented scale, complexity and cost, to compete in global energy markets,” the letter said.

The state Legislature is now considering a bill, proposed by Parnell, that would restructure and reduce state oil taxes. Parnell has promised to introduce legislation on natural gas taxes next year if the companies continue to show progress on the pipeline and LNG project.

Senior company managers signing the letter included Janet Weiss, BP’s new Alaska president; Trond—Erik Johansen, ConocoPhillips’ Alaska president; Randy Broiles, president of ExxonMobil Production Co., and Tony Palmer, TransCanada’s vice president for new developments.

The current plan, outlined in the letter, is to build a pipeline that would move 3 billion to 3.5 billion cubic feet a day of gas to a liquefaction plant in a southern Alaska port city, the letter said.

A large LNG plant would be built with three trains capable of producing 15 to 18 millions tons per year of LNG. A 400- to 600-acre site would be needed for the plant, which would also require two LNG storage tanks capable of storing 160,000 cubic meters per tank. There would be one loading jetty with two berths, the letter said.

Communities along the pipeline route would be able to take from 250 million to 500 million standard cubic feet per day for local use, from five takeoff points on the pipeline.

Estimated costs for the project, which were released in 2012, are still $45 to $60 billion, the letter said.

Parnell and legislators had hoped that the companies would include their preferred location for a south Alaska pipeline terminus and LNG plant location, but that information was not given.

The two most likely locations are Valdez, on Prince William Sound, which is also the terminus of the Trans-Alaska Pipeline System, and Nikiski, on the Kenai Peninsula on Cook Inlet, near Anchorage, which is the current location of a medium-sized LNG plant owned by ConocoPhillips.

However, officials with the companies in Juneau said other sites for the LNG plant are being considered. A decision on a site could be made in the next few months, they said.

Parnell said he was satisfied with the report.

“This represents historic progress. Never before has a gasline project been so specifically aligned and described in detail by the companies that have the capacity to build, fill, and operate it,” Parnell wrote in a statement.

Another request Parnell has made would require the companies to finalize an agreement to enter the pre-FEED stage – pre-front-end engineering and design – late this spring followed by a full season of field work this summer.

“By entering this phase, the companies will spend hundreds of millions of private sector dollars to advance the LNG project toward permitting and construction,” Parnell wrote in the statement.

BP spokeswoman Dawn Patience said, “We believe an LNG option to deliver Alaska gas to global markets could be competitive and are optimistic about continuing to progress the project beyond the concept selection phase.

“While good progress has been made, there is significant environmental, regulatory, engineering and commercial work remaining ahead of us.”

 Tim Bradner can be reached at  [email protected].

02/21/2013 - 6:53am