Will historic Russia-China gas deal impact Alaska LNG project?

On Wednesday it was announced that Russia has signed a deal with China to supply the country with natural gas for 30 years. Russian gas company Gazprom CEO Alexei Miller said that the contract is worth about $400 billion. The gas will be shipped from Russia to China via a network of pipelines.

The deal has the potential to significantly impact Europe’s relationship with Russia and changes the power-dynamics between the United States and both Russia and China. Closer to home, people are questioning what, if any, impact that deal will have on getting Alaska gas to market.

Alaska is currently working on a plan with the big three producers—ExxonMobil, BP and ConocoPhillips—to build an 800-mile pipeline to carry gas from the North Slope to tidewater in Southcentral Alaska, where it would be liquefied and put on tankers headed to Asia markets. All told, the project is expected to cost up to $65 billion.

Larry Persily, the federal coordinator of Alaska gas pipeline projects, and a go-to gas analyst, doesn’t think that the Russia-China deal will have much of an effect on the project. “It’s not a death knell for Alaska LNG” he said.

For one, the focus has been on selling Alaska LNG to Japan and Korea. Secondly, China will still need gas, he said. But more than anything, price will dictate the viability of any LNG project. He said that the price envisioned for Alaska’s LNG will be competitive with what Russia is offering China.

It is, however, a reminder that we’re not the only ones selling gas, Persily said.

Interesting note: Gazprom’s Alexei Miller traveled to Alaska in October, 2008 to talk about Alaska’s gas. While in Alaska, Miller and his entourage met with ConocoPhillips executives, and with DNR Commissioner Tom Irwin and Deputy Commissioner Marty Rutherford. During the meeting, Miller predicted that a pipeline would never be built. He said that gas would eventually be put on tankers that, with the help of ice cutters, would carry gas through the Northeast passage.

Then-Gov. Sarah Palin didn’t make the meeting. She was on the presidential campaign trail.

Contact Amanda Coyne at amandamcoyne@yahoo.com


3 thoughts on “Will historic Russia-China gas deal impact Alaska LNG project?

  1. Brad Keithley

    Personally, I think there is more potential impact here than initially meets the eye. If constructed, this brings incremental supplies that most previously anticipated headed to the European market to the Pacific Rim market, putting more competitive pressure on those projects, like Alaska, the BC project(s) and Australia, that of necessity are mostly if not entirely focused on the Pacific Rim. I agree with Larry that price ultimately will dictate results, but increased supply will lower price, pushing the high fixed cost projects (like Alaska’s) more toward the margin.

  2. Ellen

    This is a great story. You do a great job of making youreaders better understand the relevance of, in this case, an international deal to our lives here in Alaska. After reading this story, I went to google to learn more about Gazprom’s visit to Alaska and couldn’t find anything. You are a remarkable reporter. Your blog is my primary source for news.

  3. Lynn Willis

    Alaska’s immediate competition will be from Canada. The Kitimat project for a pipeline from Northern British Columbia to Kitimat B.C. for export to Asia is now into the feed stage. Our Alaskan plan still has to clear pre-feed. Pre-feed requires another 12 to 18 months and the first cash outlays of 35 to 43 million dollars from our now deficit spending state. .
    . After shale gas, how long ago in the past five years of the current Parnell Administration didn’t we clearly understand the AGIA project was not possible if it continued as a plan for a pipeline to Alberta? Despite the impact of shale gas, the AGIA plan never changed so we kept paying Trans Canada millions for nothing except for a permanent relationship with TransCanada to avoid being sued by them because the AGIA contract was so poorly written. .We simply got placed on the back burner (no pun intended).
    There certainly is no guarantee of anything at this point other than spending from the state treasury and a nice sounding promise for the upcoming state election for Governor and incumbent legislators

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