Alaska-Japanese LNG partnership emerging

As members of the resource committees in the Alaska state Legislature are focusing on the mammoth, 40-year old dream of a large diameter natural gas pipeline, the relatively modest bullet line, or the Alaska Stand Alone Project, appeared to be moving along with a potential big investor.

The state-owned Alaska Gasline Development Corp., charged with making the bullet line a reality, announced today that the Japanese Resources Energy Inc., or REI, is interested in making a multibillion dollar investment in the line, and buying a large amount of LNG—as much as 150 MMscf per day—from  the state.

According to AGDC, REI visited the Anchorage offices on Wednesday to give a presentation which expressed interest in “exploring opportunities to assist with the financing of the ASAP project.” The investments include an LNG facility, local storage, export terminal and ocean transportation assets.

REI, made up of large businesses and a bank in Japan, has been in Alaska for years, trying to establish relationships and work with Alaska’s government to enter into a joint agreement to sell the state’s North Slope gas to Japan.

In 2012, then DNR Commissioner Dan Sullivan told the consortium that it should deal with AGDC. At the time, however, AGDC was, for various reasons, in no position to be dealt with. Now, however, the time appears ripe.

AGDC President Dan Fauske said that “REI would be an excellent anchor tenant” for the project as it heads to open season in 2015.

“Today’s presentation reaffirms our belief that we have a commercially viable project capable of delivering gas to Alaskans by 2020,” Fauske said.

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10 thoughts on “Alaska-Japanese LNG partnership emerging

  1. Jon

    If this project continues to move forward there is NO way the State is going to say the companies cannot take gas from Prudhoe Bay. Do you seriously think that of the companies said they are going to sanction a project the State would say the gas needs to stay at Prudhoe — come back later?

    If we want to get gas to more Alaskans including in Fbks in the short term we need to look to Cook Inlet. There has been an explosion of activity in the last several years and some pretty big discoveries with no current market. ….. On a related point I’m pretty sure we can credit all of this activity in Cook Inlet to generous tax cuts and tax credits enacted several years ago. I’m not sure why Vic Fischer and others aren’t asking about our fair share of revenue from cook inlet.

  2. Lynn Willis

    I agree that a lot is missing. Wednesday, the three producers appeared before Senate Resources to testify regarding the AKLNG project. None of the legislators asked them if they were willing to commit the volumes of gas necessary for this new project and, perhaps as importantly, none of them volunteered that information. Also, on December 20th I asked Cathy Forester of the AOGCC on a call in show on KFQD what quantity of gas would the AOGCC support releasing. Her answer was “zero” later qualified as “zero point zero”. I asked her this because two years ago at a hearing on the bullet line, she stated that the AGIA restriction of 500 mcf per day was probably allowable; however if either the AGIA (or then) Denali Lines were to appear overnight on the slope, the AOGCC would not support releasing that volume of gas. Seems to me, based on what she said this last December, the situation is even more critical than two years ago. I am a consumer and will not be impressed if any of these gas lines wind up costing me more than imported LNG would have or if we delay the importation decision so long that we can’t react. I too am hearing about this future “tipping point” where gas will be excess to needs. So if that is true, then announce a date that after which gas is as high a priority for export as oil or condensates. Perhaps we should use this gas to generate electricity for transmission south.
    I am also mystified by this idea to truck gas to Fairbanks from the North Slope. I was told by a State Representative, 50 deliveries per day would be required. If it was 48 deliveries per day that would be two per hour over the 414 mile Dalton Highway. This is the road where they film “Ice Road Truckers” which includes Atigan Pass and few other hazards not to mention the wear and tear on equipment and effort to logistically support such an endeavor over time. CNG or LNG by rail makes more sense.
    I also agree that it is all about price and adding a 800 mile pipe line to the price doesn’t help lower costs. I am only a consumer. Ultimately I doubt if our 700,000 Alaskan consumer market is going to benefit from relying on a “trickle down” from any large project and we should explore a public utility option from local sources and/or importation.

  3. Jon

    Maybe. But maybe not. The gas is a massive asset that the producers are going to want to monetize at some point and they will reach diminishing returns by continuing to reinject about 8 bcf /d into Prudhoe. Some say this day is coming in the not too distant future. But you also need to account for why is Exxon is spending over $4 billion at Point Thomson just to recover 10k barrels a day. The only way this investment makes sense is if there is a major gas project sanctioned in the near future. And why did Exxon put its top LNG project manager in charge of this project?

    Also, I’m not sure why some think that Asia companies are aligned with the state. They are very likely going to demand that the state heavily subsidize the gas and they will certainly demand a low price for the gas.

    Finally, I find it odd that people think a state agency can responsibly build a gas treatment plant, integrate the CO2 with PBU production and construct a 800 mile pipeline. Does anyone else find it odd that mike Hawker – aka mr Ayn Rand – is such an ardent supporter of a state run project? Fauske has already been wrong about straddle plants. What else is he missing?

  4. Lynn Willis

    Thanks for the question. What I am talking about is the very probable illusion the Governor is creating to any potential customer such as REI that they might want to wait because we have a more viable a project than ADAG/ASAP with the AKLNG. project. You state the exact reason to wait – more volume with lower tariffs. Problem is that AKLNG is likely to not happen if for no other reason the volumes of gas required are better used to extract oil and to produce gas condensates. Parnell will be termed out or long gone when that reality sinks in,
    I agree Fauske has buckets of cash and apparently we are about to hand out even more buckets to Trans Canada once more. .

  5. Jon

    Lynn, I’m not sure what you mean by not going full speed ahead on the bullet line. Last year Parnell signed into law HB 4 which gives Fauske and AGDC extraordinary power to move this project forward. Fauske also has a bucket of money. That said, Alaska’s interests are far better served by a much bigger line. More gas, more revenue, more jobs.

  6. Lynn Willis

    Our Governor had better speak on this proposal and perhaps leave AGDC alone to prosper by stopping all talk of yet another line until the AGDC open season is completed and we know for certain if this REI proposal will work. . Does AGDC now only need to have the AGIA volume restriction removed to fill the needs of REI and perhaps additional customers? Is there now a even a remote possibility that our Governor and legislators, by insisting on their newest proposed AKLNG pipeline could now destroy this proposed involvement with AGDC by REI?
    P.S. To date, still no commitment from the producers or AOGCC to supply North Slope gas for any project.

  7. Annonymous

    Why isn’t the Parnell administration attempting to advance the bullet line ? This is something we can control and aren’t beholden to Exxon to advance. I have a lot more confidence in Dan Fauske than I do in DNR and DOR to advance and proitect Alaska’s interests. The Commissioners of DNR and DOR are nice well-intended people, however, their world experience and expertise is very limited. I f Parnell had half a brain, which is debateable, I think he should put Dan Fauske’s team in charge of it all and get something done. This feels like a game of charades that we’re playing with big oil. I hope this is more than a ploy to insure the Governor’s election. Can someone tell me why we are not going full speed ahead on a small diameter line ? It’s time for action. Let’s hear more from these Japanese guys. Why aren’t they before the legislature testifying ? Why isn’t the Governor holding press conferences with them ? Why are we allowing ourselves and our future to be controlled by the oil companies ? I just have a hard time believing and trusting Parnell. I want to but it is difficult.

  8. Trish

    Our utility bills here in the Imterior are outrageous. Some of us pay more to heat our homes than what we pay for mortgages. I feel as if our elected officials are allowing the oil abd gas producers to control the state’s future. We can’t and won’t make them build a gas pipeline. But we can buil a small diameter line ourselves. Let’s do it. Let’s work with the Japanese. This sounds like a win – win situation. Then and when the oil guys want to build somethoing they will. Inm the mean time, Alaskans will be the beneficiaries.

  9. Princeton

    This sounds like an opportunity for the state to explore. Wrapping the market, Japan, into the deal seems as if it makes tremendous sense. I wish the governor would embrace this project and advance it as the greatest benfits to Alaskans is here. The large diameter pipeline is still too $uch out of the control of the state and may or may not get built. This project could go and go now. When will our state leaders ever realize this ?

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