LNG project still being considered

Posted: Thursday, March 01, 2001

JUNEAU -- After almost two years of study, a group that includes two major oil producers hasn't developed a competitive way to bring North Slope gas to market as liquefied natural gas. But representatives of the group said they're still trying.

The group expects to know by the end of the year whether it can put together an economically viable project to export LNG from Valdez or Nikiski, said Steve Alleman, commercial manager of the Alaska North Slope LNG Project.

While the oil and gas industry has focused attention and money on piping natural gas to the Lower 48, a group that includes representatives of Phillips Alaska and BP Exploration (Alaska) is also continuing to study the possibility of liquefying some of that gas and shipping it to Asian and West Coast markets. The group also includes Foothills Pipe Lines of Canada and Marubeni Corp., a Japanese trading company.

The group spent more than $12 million on a first phase analysis of the project, Alleman told the House Special Oil and Gas Committee Tuesday.

The group didn't come up with a project that works yet, but it was encouraged enough to continue with a second phase that's supposed to wrap up in fall or early winter of this year, he said.

''We're still trying to make this a commercially viable project,'' Alleman said.

In the second phase the group will look at the possibility of sharing some costs with a pipeline to the Lower 48, if that project goes ahead.

''We certainly believe there is enough gas to do both projects,'' Alleman said.

The group will also look at LNG markets on the West Coast of the United States and Mexico and gather more information on competing LNG projects elsewhere in the world. It will also continue to try to reduce the costs of an LNG project, said George Findling, manager of external strategies for Phillips.

So far the group's main focus has been markets in Asia. Demand for LNG there is growing, but the competition to serve that market is fierce, Alleman said. Alaska's difficulty in competing is the need to build an 800-mile pipeline to reach tidewater.

''The reality is there are other projects that are already at tidewater,'' Alleman said.

The working group hasn't decided whether the pipeline should go to Nikiski or Valdez yet.

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