Alaska LNG achieves cost reductions: Companies

The Alaska LNG Project is making progress in cost-reductions as preliminary engineering nears completion, managers of a joint industry-state consortium told state legislators in recent briefings. Wednesday. Estimates made earlier were for costs to range from $45 billion to $65 billion, but changes in the project made in preliminary Front-End Engineering and Design have lowered the cost to about $45 billion, industry members of the Alaska LNG Groups told lawmakers. The state of Alaska will take over the project at the end of 2016. Ongoing management will be by the Alaska Gasline Development Corp., the state-owned gas corporation. Alaska LNG involves an 800-mile, 48-inch pipeline built from the North Slope to a large natural gas liquefaction plant in southern Alaska and a large gas treatment plant on the slope needed mainly to remove the 12.5 percent carbon dioxide that is in Prudhoe Bay field gas, Butt said. About 35 trillion cubic feet of gas reserves have been identified on the slope to support the pipeline and LNG project.So far about $600 million has been spent in the “pre-FEED” on Alaska LNG along with $150 million spent earlier in “concept” development by North Slope producers BP, ConocoPhillips, ExxonMobil and the state of Alaska, who are partners in the project. Significant cost reductions have been achieved in the project by reducing the need for specialized steel for the 42-inch pipeline in Interior Alaska, where there are unstable permafrost soils, and in the amount of steel fabrication overall. A thorough technical investigation and consultations with federal pipeline safety officials wlll now allow the project to use conventional thick-walled steel for about 300 miles of pipe in the state’s interior rather highly specialized, and costly, pipe designed to handle the movement of soils in unstable permafrost, Butt told a joint hearing of the state House and Senate Resources committees in Anchorage.

In overall fabrication needs the project has achieved a 45 percent reduction of tonnage compared with what was forecast initially, Butt said. The savings amount to about 40,000 tons less in modules and equipment needed, he said. Company officials also said that refinements in design would allow the project to partly start up while construction of a large gas treatment plant on the North Slope and a gas liquefaction plant on the Kenai Peninsula, at the southern end, are still being completed. That will improve the project economics, he told the legislators.