Alaska Gasline Development Corp. signed a letter of intent with Tokyo Gas Co. Ltd. for the Japanese utility to possibly purchase LNG from the proposed Alaska LNG project, the latest nonbinding deal with a major Asian buyer as the developer weighs whether there is a spot in the market for another multibillion-dollar export venture.
The letter is the fourth preliminary agreement concerning the development of the $43 billion project since the state embarked on an aggressive marketing push in key Asian markets. The state-run Alaska Gasline in June signed a memorandum of understanding with South Korea's Korea Gas Corp. during President Moon Jae-in's visit to the U.S. While President Donald Trump made his rounds in Asia, the state agency signed a joint development agreement with China's state-owned bank and sovereign wealth fund China Petrochemical Corp. and another MOU with Vietnam's PetroVietnam Gas Corp.
The arrangement with Tokyo Gas marks the start of dialogue between the two companies regarding the sale of LNG from the Alaska project, according to a Dec. 5 news release. It is also expected to "[help] round out the sales volumes" from the project, Alaska Gasline President Keith Meyer said.
For Tokyo Gas, the letter of intent would allow for more balanced supply, flexibility and affordable pricing, the company said in a separate news release. "As the closest source of North American LNG to Japan, with a shipping time of as little as seven days point to point, Alaska LNG is naturally an economic and reliable source of LNG for [Tokyo Gas]," said Michiaki Hirose, president of Tokyo Gas.
While the flurry of early agreements signals interest, significant hurdles remain for Alaska LNG, said Larry Persily, a former federal coordinator for Alaska gas pipeline projects. "It's good to see another potential customer is interested, but I worry that we're getting wrapped up in premature euphoria," he said. "The economics are still very challenging."
The integrated Alaska project is one of several LNG export projects seeking approval from the Federal Energy Regulatory Commission. Alaska Gasline took over the project in January after a group of North Slope majors decided they no longer wanted to move forward as joint developers. The project would include three liquefaction trains able to produce a total of 20 million tonnes per annum and an 800-mile pipeline that would carry gas to the Nikiski terminal.
