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Governor expects final call on Alaska LNG's future within 60 days

The fate of the Alaska LNG project in its current form may be known in less than two months, Gov. Mike Dunleavy said March 15.

The Alaska Gasline Development Corp., or AGDC, is closing in on a decision about the feasibility of the $43 billion project for which the state has teamed up with BP PLC and Exxon Mobil Corp., Dunleavy said at a press briefing at CERAWeek by IHS Markit in Houston.

The state has already had discussions with potential customers in Asia, including major LNG importer China, but the project's viability has recently been called into question by the AGDC's interim president, Dunleavy said.

"We should know within 60 days if the current project is economical," he said. "If the state's going to be a partner, there has to be a return. It's the same, obviously, for investors … It has to pay off for everyone."

Alaska LNG involves a proposed 800-mile, 42-inch-diameter gas pipeline from the North Slope to an LNG export terminal on the Kenai Peninsula in southern Alaska. There are 35 Tcf of proven gas reserves in the North Slope. The pipeline and terminal project would be capable of exporting 20 million tonnes per year of LNG.

The state has been looking for ways to move its "enormous amounts of gas" for decades, and Alaska LNG has been one of the most viable projects to date. But competition from other gas producing regions, including the Permian Basin and Haynesville Shale, could threaten Alaska LNG's chances.

Asked whether Gulf Coast LNG facilities could hurt the project, Dunleavy said they "certainly" could in the short term.

"Sometimes, the short term plays into the long term," he said.

The long term, however, is part of the state's sales pitch for Alaska LNG. While Alaska's product may be more costly than LNG derived from the Permian Basin, the lifecycle of Alaska's production base is longer, Dunleavy contended.

"With Alaska being a conventional play, you'll get longer investment and returns will be longer," he said. "Our play is more of a long-term play. People here in Texas want to balance out their portfolio, and they're looking at Alaska."

Whether or not Alaska LNG proceeds, the state may find its export options opened by unusual means: climate change. The Republican governor said the warming Alaska is undergoing may melt enough ice that tankers can dock directly at the North Slope.

"That provides an opportunity to lift gas directly onto ships without need of a pipeline. You eliminate an 800-mile pipeline through that," he said.