State gas project “shutdown”: Sending a signal?

State gas project “shutdown”: Sending a signal?

Was this a signal? Alaska Gasline Development Corp.’s CEO, Joe Dubler, told state legislators the state corporation is prepared to shut down the big Alaska LNG Project if customers or investors are not lined up, but there was no timetable on a decision. Some think the statement, widely reported, was a signal to potential partners that time may be limited for Alaska LNG and that decisions should be made. Sinopec, the major Chinese energy company, is considering buying LNG from the Alaska project with a decision threshold in June. A decision had been expected in December but was postponed due to the U.S.-China trade spat. If the trade spat is resolved soon and includes agreements for China to buy more LNG from the U.S., as is expected, prospects for Alaska LNG will improve. AGDC is meanwhile trimming expenses. Dubler told the legislators that the state corporation is closing its office in Houston and will reduce its space in its Anchorage offices, giving up one floor in the Calais building to consolidate to the second floor.

Talks underway with two of three slope producing companies
Meanwhile, preliminary talks between the state administration and two of the three North Slope producers are underway. The third company isn’t interested, but will sell gas to a project. Gov. Mike Dunleavy is trying to get the companies involved again (they had exited in 2015.) We’re told that producer involvement would also boost Sinopec’s confidence in the project. On other news, the U.S. Federal Energy Regulatory Commission delayed its release of a draft Environmental Impact Statement for the Alaska LNG Project for three months, which also delays the Final EIS to June, 2020. We’re told the federal government shutdown was a factor. AGDC said the action won’t affect the overall project schedule.

“Smaller” backup gas pipeline gets its federal permits
In a related development the U.S. Army Corps of Engineers and the U.S. Bureau of Land Management issued a joint Record of Decision for the Alaska Stand Alone Pipeline, or ASAP, final EIS. This is the smaller gas pipeline proposed as a backstop in case the larger Alaska LNG Project is delayed. The Record of Decision triggers the Clean Water Act Section 404 Dredge and Fill permit from the Army corps and the right-of-way across 299 miles of federal land. The right-of-way can also be used for Alaska LNG, so the ASAP approval represents key regulatory progress for both projects. The ASAP permits also includes a lateral pipe to reach Fairbanks, which Alaska LNG would also use.

ASAP is a smaller project than Alaska LNG but it would still be a substantial undertaking, with a 2015 cost estimate of $10 billion. It would involve a 36-inch gas pipeline instead of the 42-inch pipe planned for Alaska LNG. It also has no LNG export plant at the south end and would terminate in the Mat-Su Borough, unlike Alaska LNG with its big gas liquefaction plant at Nikiski, on the Kenai Peninsula. If the smaller project could be built, with a large industrial customer in the Mat-Su, the ASAP project would also avoid having to build a costly submarine crossing of Cook Inlet to the Kenai Peninsula.

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