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Corrected: Alaska LNG to delay filing of FERC application for project

Anchorage — The Alaska LNG Project will delay its formal application to the US Federal Energy Commission until mid-November 2016 from the September 2016 date that had been planned, a spokesman for a project partner said Friday.

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The project team formally notified FERC of the delay in its quarterly report filed in late March with the agency, said Miles Baker, spokesman for the Alaska Gasline Development Corp. the state gas corporation that is part of the project with North Slope producers BP, ConocoPhillips and ExxonMobil.

Alaska LNG is a $45 billion-$65 billion project that would build an 800-mile pipeline from the North Slope to a large LNG export plant in southern Alaska. Up to 20 million mt of LNG yearly could be exported under a Energy Department license that has been issued.

The delay in filing the FERC application is the first formal acknowledgment that the schedule is slipping.

Article Continues below...

"There's no doubt we are facing strong economic headwinds with this project," Baker told the Alaska Support Industry Alliance, a contractor group. "It's no secret that LNG prices are not as high as when we started this project. With energy prices this low the partners, including the state, have to look seriously at all options and capital investments."

A priority is still to keep the momentum of regulatory work with FERC active including filing a series of 13 resource reports required by the agency in the third quarter of this year. Initial drafts of the reports were filed in February.

Project developers will complete the preliminary front-end engineering and design work by year-end, after which the FERC application will be filed, Baker said. This will position the project developers to make a front end engineering and design decision in 2017 and a final investment decision in 2019 or 2020, he said.

In another development, the project team has completed a study of 48-inch-diameter pipe with the 42-inch-diameter pipe initially planned and is recommending the project stay with 42 inches.

Governor Bill Walker had asked that the idea of using a larger diameter pipe be revisited because larger volumes of gas could be shipped more economically if more gas discoveries are made on the North Slope, which state geologists believe will happen.

The partners spent $20 million on the evaluation of the pipe diameters, which included physical testing of samples of pipe.

Miles did not comment on details of the recommendation on pipe diameter but it is known that going the larger size would have complicated logistics and construction planning and raised costs.

About $230 million is being spent this year mostly on field work associated with the preliminary engineering and design work, Baker said.

The decision on final engineering, planned for 2017, is seen as a crucial test of the partners' confidence because it is expensive, with costs estimated a $1.5 billion or more.

Talks are still underway among the project partners and the state on possible commercial changes to the project structure. In a press conference earlier this spring, the governor and senior managers of ExxonMobil, BP and ConocoPhillips said they will consider possible changes aimed at lowering costs and risks. The original target for a new commercial structure was the end of March, the governor said, but no new plan has yet been announced.

(This version of the story corrects the target dates to 2016 in the first paragraph.)

--Tim Bradner, newsdesk@platts
--Edited by Richard Rubin,