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BP, ExxonMobil to contribute $20 million toward licensing of Alaska LNG project: official


ConocoPhillips not part of current effort

State lacks funds to complete licensing process

Anchorage — North Slope producers BP and ExxonMobil have agreed to contribute $20 million to help the state of Alaska complete a federal licensing process for the proposed $41 billion Alaska LNG Project, Alaska Lieutenant Governor Kevin Meyer said Thursday at an industry conference in Anchorage.

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The state-owned Alaska Gasline Development Corporation needs $30 million and another year to complete work with the Federal Energy Regulatory Commission on a license for Alaska LNG.

If built, the project could export up to 20 million mt of liquefied natural gas from an LNG plant in south-central Alaska. Gas would be shipped from the North Slope through an 800-mile, 42-inch-diameter pipeline that is also planned.

The companies are committing $10 million each, Meyer said.

"This is a step forward, but it doesn't get us a project yet," Meyer said in an interview. For Alaska LNG to be built, customers and financing would be needed. But to allow the project to falter now, so late in the licensing process, would be huge setback, Meyer said.

Three major North Slope producers -- ConocoPhillips as well as BP and ExxonMobil -- were in a consortium with the state's AGDC until 2016, when the companies withdrew due to falling energy prices and a mixed outlook for LNG demand.

Former Alaska Governor Bill Walker opted to continue work on the FERC licensing and the required environmental impact statement with the producers' encouragement, and a draft EIS is expected this summer. Although technical work on the EIS and license has proceeded and is now far along, the state's own financial problems, stemming from a drop in oil revenues, have depleted AGDC's reserves to the point that there will be insufficient money to get through the licensing work planned for 2020, officials of the corporation have said.

Governor Mike Dunleavy, who replaced Walker last December, has been working to get the major Slope producers back in as Alaska LNG partners and investors and the $20 million in funding is the first indication that Dunleavy's efforts may be bearing some fruit.

ConocoPhillips, which participated in funding the early conceptual and preliminary engineering, is not part of the current effort. The company has its hands full in developing and financing new North Slope oil discoveries and at this point would prefer to sell its gas at the wellhead to the AGDC project rather than be involved it its ownership, company spokesperson Natalie Lowman said earlier.

Earlier this year BP and ExxonMobil signed a technical assistance agreement with AGDC and meetings have been underway on ways of reducing the current $43 million cost estimate.

The three major Slope producing companies own the 35 Tcf of North Slope gas along with the state itself, which owns about one-fourth of the gas through its royalty and tax share of future production.

Meanwhile, a potential investment and LNG sales deal with three Chinese companies engineered by former governor Walker that would have involved three-quarters of Alaska LNG's production is on the back burner amid the current US-China trade battle. A final agreement between the state and a consortium of Sinopec, Bank of China and China Investment Corporation was to have been signed last December but was not.

When the potential China deal was announced, AGDC had hopes of getting sales contracts and financing secured in early 2020, with a start of construction in 2021 and completion and first LNG shipments in 2024 or 2025.

Earlier this spring, AGDC said the project schedule is being extended.

-- Tim Bradner,

-- Edited by Valarie Jackson,