Anchorage — The new CEO of Alaska's state gas corporation told legislators Thursday he is prepared to shut down the project and return unused funds to the state treasury if customers or investors do not appear in the next few months.
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Joe Dubler was named in January as CEO of the Alaska Gasline Development Corp. by Governor Mike Dunleavy.
Dubler told a state Senate budget subcommittee that Dunleavy wants an evaluation of the viability of the $43 billion Alaska LNG Project.
Despite marketing efforts and about $1 billion spent in recent years on engineering and environmental work, the project has not attracted customers and faces increasing competition from other LNG projects. That includes a Shell-led project in British Columbia that would export LNG to the same Asian markets Alaska is targeting.
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 southcentral Alaska. There are currently 35 Tcf of proven gas reserves on the slope.
The pipeline and terminal project would be capable of exporting 20 million mt/year of LNG.
"Our current plan is to step back and evaluate technical and commercial aspects of the project. If it is viable and we can solicit partners, we will continue into front-end engineering and design," Dubler told the lawmakers.
"If it is not viable, then the project will be wound down and all remaining funds will be returned to the (state) general fund," Dubler told the committee.
A draft environmental impact statement being prepared by the US Federal Energy Regulatory Commission is expected in March after being delayed by the federal government shutdown. Under FERC's current schedule, the final EIS and federal permits are expected in the spring of 2020.
Dubler said AGDC will continue spending state funds on technical studies that federal agencies and FERC may require. Dunleavy said he does not want to spend anything beyond that absent investors or customers.
Alaska is facing a $1.6 billion budget deficit and the governor is pulling funds from state corporations. He has taken $5 million from AGDC already.
AGDC has appropriations sufficient to keep its doors open until mid-2020, and its current year operating budget of $10 million is approved. But a major expenditure, such as final engineering, would require an investor, Dubler said.
Talks with a Chinese investor group of Sinopec, Bank of China and China Investment Corp. appear stymied by the US-China trade discord.
Dunleavy has asked major North Slope gas owners BP, ConocoPhillips and ExxonMobil to consider rejoining the project. The three companies were partners with AGDC in Alaska LNG until 2015 when they withdrew, citing market concerns.
Dubler said AGDC is already downsizing, closing an office in Houston and reducing its leased office space in Anchorage by half. A small marketing office in Tokyo with a part-time representative is being retained.
The state has already invested about $500 million in Alaska LNG; the North Slope producers, prior to their withdrawal, invested a similar amount.
-- Tim Bradner, firstname.lastname@example.org
-- Edited by Keiron Greenhalgh, email@example.com