Governor wants producers back in Alaska LNG Project

Governor wants producers back in Alaska LNG Project

Gov. Mike Dunleavy has initiated a “full project review” of Alaska LNG, the state-led major gas project, a spokesman for the Alaska Gasline Development Corp. told us. “We will complete the Alaska LNG project permitting process with the Federal Energy Regulatory Commission (FERC), continue commercial negotiations with potential customers, and seek private sector partners to help advance the project and share in the risk,” AGDC said in an email. Meanwhile, sources reported that talks are underway between the state administration and North Slope producers about becoming part of the project again. Three North Slope producers, BP, ConocoPhillips and Exxon Mobil, were partners with AGDC in doing preliminary engineering and regulatory work until the companies withdrew in 2015, citing low energy prices and sub-optimal returns expected from investments in the $43 billion gas project. Former Gov. Bill Walker decided to continue with Alaska LNG mainly on regulatory work and marketing. Despite the 2015 decision to withdraw as partners, all three producers voiced continued support for the project. An initiative previously planned for an equity investment solicitation led by Goldman Sachs is meanwhile on hold, AGDC said. Dunleavy’s desire to reengage with the three major slope producers first came to light last week in a presentation by new revenue commissioner Bruce Tangeman to the Senate Finance Committee. The governor had always been uncomfortable with the state leading the huge project, mainly because of the risks. “The risk is significant, and we’re not comfortable in shouldering that,” Tangeman told the senators Jan. 23. Dunleavy also did a shakeup recently at the state corporation, replacing some board members and terminating AGDC’s former CEO, Keith Meyer.

Slope producers BP, ConocoPhillips and ExxonMobil were previously part of a four-party consortium that included the state gas corporation. The group completed a $600 million Preliminary Front-End Engineering and Design for Alaska LNG but in 2016 the producers
pulled away. “It wasn’t that the companies weren’t interested but at the time they wanted to slow the project and reduce cash calls,” since low oil prices were eating into available cash for the companies, Tangeman told the Senate committee. As a partner in a four-party consortium the state had the option to continue work with the AGDC as owner and manager, with efforts focusing mainly on securing federal regulatory approvals and marketing. To stop working, much of the investment in a federal Environmental Impact
Statement for a FERC operating certificate would have been lost.

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