ANCHORAGE (AP) -- Despite formidable obstacles, backers of a liquefied natural gas project continue to push for a monumental, multibillion-dollar plan to ship Alaska's natural gas reserves overseas.
Supporters have tried to hatch the project for 25 years, but despite millions of dollars in studies, elusive markets, high costs and the bottomless enthusiasm of the project's biggest booster, Jeff Lowenfels, liquefied natural gas has yet to come to life.
With world natural gas demand booming, developers are again touting LNG as the best way to bring North Slope gas to customers.
''We could do this project right now,'' Lowenfels told the Anchorage Daily News.
Lowenfels is president of Yukon Pacific Corp., a company formed in 1982 to develop an LNG project. Richmond, Va.-based transportation giant CSX Corp. owns Yukon.
The project would involve building an 800-mile pipeline from the North Slope to a southern Alaska port, such as Valdez. The gas would then be chilled to minus 260 degrees Fahrenheit, compressed and made into a liquid, then shipped on special tankers to Asia, or possibly, Mexico. Backers say that LNG would provide more jobs, more state revenue and more investment in Alaska than other projects.
The trick is making it work.
The North Slope's 35 trillion cubic feet of natural gas reserves are among the largest in North America. More than 2,000 miles from the existing Canadian pipeline grid and freighted with huge development costs, the North Slope's natural gas reserves have, so far, been uneconomic to develop.
But last winter Lower 48 gas prices hit all-time highs, cresting at $10 per thousand cubic feet. Also, the companies that hold most of the gas -- BP, Exxon Mobil and Phillips -- reshuffled ownership at the aging Prudhoe Bay oil field to make them much more inclined to move Prudhoe's vast store of natural gas off the Slope.
BP and Phillips have studied LNG and for now conclude the project is too expensive. Instead the companies have fixed their gas development plans on a pipeline from the North Slope to the Lower 48.
LNG backers say their project would be the best for Alaska.
''Jobs, state revenue and gas for Alaskans,'' said Scott Heyworth, an LNG backer, as he ticked off the attributes of the project in Anchorage this month.
Many believe that an Alaska LNG project cannot compete in Asia with suppliers such as Malaysia, Indonesia, Sakhalin Island or the Middle East. Those regions have gas fields closer to big LNG markets in Japan and South Korea.
Another advantage: They do not need to build an 800-mile pipeline to get the gas on a ship, unlike Alaska. Market growth in Asia could be strong in the next 10 years, said state oil and gas economist Roger Marks, ''but none of these areas has Alaska's pipeline problem.''
Without agreements from the companies to sell their gas reserves, independents such as Lowenfels' Yukon Pacific can get neither financial backing nor long-term contracts from buyers in Asia.
Lowenfels contends Phillips, BP and Exxon are balking in part because they do not want Alaska gas competing with their other Pacific gas fields.
He and other Alaska LNG proponents argue that markets are emerging and costs are falling.
In the past decade construction costs for LNG facilities and tankers have fallen about 40 percent, said Tom Woods, an LNG specialist in Houston with energy consulting firm Ziff Energy.
The whole marketplace where LNG is sold is shifting from long-term contracts to short term and open market sales, Woods said. For the past 30 years, Japan has dominated the limited markets for LNG. Now, facilities to receive the gas are slated to open in China, India, Korea and Mexico.
The state's position between Asia and the West Coast could allow LNG to go to multiple markets, he said.
To offset Alaska's high costs, a group backed by Fairbanks, Valdez and the North Slope Borough proposes a government port authority to build the pipeline with tax-free bonds and operate the pipeline without having to pay federal taxes.
Another LNG study group that includes Phillips and BP is assessing how to marry the project to a Lower 48 pipeline. George Findling, spokesman for the group, said members are studying a spur pipeline from Fairbanks to a southern Alaska port to improve costs for an LNG project.
''The synergies could be significant,'' Findling said.
Peninsula Clarion © 2015. All Rights Reserved. | Contact Us