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Highlights

Draft environmental impact statement expected in March

Regulatory approvals seen as significant project de-risking

Anchorage — Despite a world awash in liquefied natural gas, Alaska is still working on its $40 billion-plus Alaska LNG project, which if built could deliver 20 million mt/year of LNG to world markets.

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State officials involved in the project, however, say they are under no illusions about current LNG markets.

Their goal, they say, is to get the project ready when it comes to licensing and permits and to get an updated cost estimate so it is ready to go if markets turn around.

Joe Dubler, CEO of the state-owned Alaska Gasline Development Corp. (AGDC), said ExxonMobil and BP are still contributing to the ongoing work under an agreement.

Dubler briefed a state legislative committee Friday on the project. The budget is sharply pared back to about $15 million being spent this year, mostly on licensing work with the US Federal Energy Regulatory Commission, Dubler told legislators. BP and ExxonMobil, who are major North Slope gas owners, are picking up two-thirds of the tab, with AGDC is paying the other third, he said. The state is also a major natural gas owner through its royalty share of gas reserves.

Dubler said AGDC now expects a final environmental impact statement to be issued by FERC in March. Typically a final environmental impact statement comes a month later, and a record of decision and the FERC license is expected in June, Dubler said. That would give the project the bulk of its necessary federal and state approvals as well as rights-of-way across federal and state lands for the 800-mile corridor in which a 42-inch-diameter pipeline could be built from the North Slope to a liquefaction plant on the southern Alaska coast.

Having these approvals is a big gain in "de-risking" the project because many global energy projects have gotten bogged down in local opposition and delays in government approvals. "We're finding that investors will not tolerate regulatory risks," Dubler said.

MARCH A KEY MONTH

On another level, AGDC, along with BP and ExxonMobil, has contracted with Fluor to update a 2015 cost estimate for the project. That is expected in March, Dubler told the legislators. The work in 2015 was to develop pre-front end engineering and design, and was led by ExxonMobil with all three major North Slope producers – including ConocoPhillips – and the state helping fund $600 million for the work. It resulted in a $43 billion estimate.

Since then, the state, with ExxonMobil and BP, but without ConocoPhillips, has been working on reducing that cost estimate, with part of it through increased modularization, or building major plant components off site and moving them to Alaska rather than fabricating them on-site, which drives up labor costs, Dubler said.

It has always been expected that the large gas treatment plant that would be needed on the North Slope to remove carbon dioxide would be built in large modules and barged to the area, but the proposal for the liquefaction plant in southern Alaska involved on-site construction. That will probably change now, he said.

Also, a review of project costs in mid-2019 led by ExxonMobil and BP found that the 2015 construction plan, with its $43 billion estimate, was "top heavy" with project management, Dubler said.

"If we can get costs down to where we have a viable project, we should have no problems attracting investors," Dubler said.

About 35 trillion cubic feet of gas has been discovered and confirmed on the North Slope over the years, most of it associated with large oil finds. The gas owners have worked for decades on various plans to commercialize the gas, but the biggest hurdle has been the cost of the 800-mile pipeline to move the gas south to a coastal liquefaction plant.

Recently, Qilak Energy, an Alaska subsidiary of Dubai-based Lloyds Energy, began conceptual studies for an offshore North Slope LNG plant that would use ice-breaking tankers to move liquefied gas through the Beaufort Sea, where the ice pack is shrinking, to markets in Asia via the Bering Strait. Qilak is working with ExxonMobil, which owns substantial gas reserves at Point Thomson, which is near where Qilak would build its plant.