BP helps Alaska LNG shore up gas supply for project

The wheels haven’t stopped turning in Alaska’s quest to lure the necessary resources that will push its long-desired LNG mega-project toward fruition.

After sales trips to meet Asian customers, including a meeting in China with President Trump, and a lot of work behind the scenes, the Alaska LNG Project reached a historic milestone this week when BP Alaska and Alaska Gasline Development Corporation (AGDC) agreed to key terms of a Gas Sales Agreement, including price and volume. The agreement was signed May 4.

This is an important step toward finalizing a long-term gas sales agreement in 2018 that will allow AGDC to purchase BP Alaska’s share of 30 trillion cubic feet (TCF) of gas from the Prudhoe Bay and Point Thomson units.

BP operates the Prudhoe Bay field – the largest oil and gas field in North America and owns a 26 percent share of Prudhoe Bay as well as a 32 percent share of the nearby Point Thomson field.

BP Signs Binding Gas Sales Agreement to Supply Gas to Alaska’s $45 Billion LNG Export Project

“We are very pleased to be part of the state’s vision to bring Alaskan natural gas to new and expanding markets globally. We think this is good for the state, good for BP and good for the environment,” said Bob Dudley, BP’s top executive.

This development comes just six months after the signing in Beijing of the five-party joint development agreement to monetize Alaska’s natural gas.

“This Gas Sales Agreement is a significant factor in progressing the Alaska LNG Project. We have secured the customers, we have progressed on the pipeline build with regulators and the finance community and now we have a commitment that there will be gas to sell and put through the pipeline. I look forward to continued negotiations to secure supply from other North Slope producers,” said AGDC President Keith Meyer.

The original project had a group of supermajors as partners.  Alaska LNG was described as a “gigaproject” by those involved, with an estimated price tag of $45 to $65 billion. Alaska LNG was being developed by a partnership that included energy majors BP (ticker: BP), ExxonMobil (ticker: XOM) and ConocoPhillips (ticker: COP). TransCanada was involved in the pipeline aspect of the project. The companies pulled out in the summer of 2016.

But Alaska wants the project, and the state has taken the initiative to move it forward.

BP Signs Binding Gas Sales Agreement to Supply Gas to Alaska’s $45 Billion LNG Export Project

The idea of the project is to move North Slope natural gas through the resource-rich center of Alaska providing natural gas to fuel local markets, mining, and industrial needs, according to Alaska Gasline Development Corp. (AGDC), the project’s sponsor. A new liquefaction facility built in Nikiski (North America’s longest serving LNG export location) will provide access to global customers.

The proposal calls for a three-train, 6 million tons per annum (approximately 246 Bcf per annum) LNG plant and a gas treatment plant with expected capacity of 3.7 Bcf/d, connected by an 800 mile, 42” pipeline with a minimum of five domestic gas off-takes along the pipeline route.

BP Signs Binding Gas Sales Agreement to Supply Gas to Alaska’s $45 Billion LNG Export Project

The backbone of the project is the 800-mile, 42-inch diameter pipeline. With a daily capacity of 3.3 billion cubic feet, multiple compressor stations along the pipeline will help carry natural gas from the North Slope to Southcentral Alaska. Multiple interconnection points along the pipeline will provide for in-state gas distribution, AGDC said. The pipeline design calls for average throughput of 3.1 billion cubic feet per day with maximum capacity of 3.3 billion cubic feet per day, according to AGDC.

BP Signs Binding Gas Sales Agreement to Supply Gas to Alaska’s $45 Billion LNG Export Project

AGDC included project updates in its April meeting presentation:

  • JDA Group (AGDC, Sinopec, Bank of China, China Investment Corp) developing transition from “Framework” phase to “Definitive”
  • Other announced MOU’s & LOI’s include KOGAS, Tokyo Gas, & PetroVietnam Gas; these are being advanced
  • There are a number of un-announced MOU’s & LOI’s, that are also being advanced
  • Negotiations continue with upstream producers re gas supply
  • Discussions continue with DNR, DOR, and other SOA agencies re their roles
  • Goldman Sachs & Bank of China appointed as investment advisors
  • Discussions continue with Legislature to obtain Receipt Authority
  • FERC issued NEPA “schedule notice” in March
    • Draft EIS by March 2019; EIS by Dec, 2019; ROD by Mar, 2020
  • Other major permit acquisitions are also advancing
    • Corps of Engineers Section 404, ADEC Air Quality, etc.
  • AGDC responded to 81% of the FERC 15 Feb, 2018 “DR4” comments
    • AGDC responded to 100% of the 2017 Data Requests (DR) 1, 2, & 3 comments
  • Design/construction phase contracting strategy being finalized; commencement subject to gaining Receipt Authority & funding

AGDC President Keith Meyer told Alaska Public Media that the company has committed to selling all of the gas it can produce from those fields, but that won’t fill the pipeline. Meyer said the state corporation will need to sign gas supply agreements with all of the North Slope producers for the project to run at full capacity. Meyer said the gas supply agreements are key to obtaining financing.

 


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