Yukon Pacific exploring North American market for gas

Posted: Monday, September 11, 2000

ANCHORAGE (AP) -- An Anchorage-based company that's been promoting natural gas exports to Asia is rethinking its plans and is hoping now to sell gas in North America.

Representatives from Yukon Pacific Corp. were to meet with Mexican officials Monday to explore building a liquefied natural gas receiving plant in western Mexico.

Yukon Pacific has been pushing a massive LNG export project since 1982. The company wants to build a multibillion-dollar pipeline from the North Slope to Valdez and then ship the gas to Asia, but low prices and a lack of market in Asia have stalled those plans.

The company has begun studying alternatives in the face of rising natural gas prices across North America.

''We're looking for a market to take a portion of our volume,'' said Jeff Lowenfels, president of Yukon Pacific.

Lowenfels estimates the cost of a North Slope LNG project to be about $8.2 billion.

The huge investment demands huge sales -- up to 10.1 million tons per year, Lowenfels said. Placing that much gas in Asia has proven difficult.

While east Asian demand is poised for a sharp increase, huge supplies in Thailand, Indonesia, Russia and elsewhere may be ready to fill the gap.

''There is a continuing realization that the smaller the bite sent to Asia the easier it is to sell,'' Lowenfels told the Anchorage Daily News.

With natural gas prices rising more than 60 percent in the past year, North American exploration is booming and a number of projects are underway to sell Alaska's estimated 40 trillion cubic feet of gas.

Alaska's big oil producers -- Exxon Mobil, BP Amoco and Phillips -- are exploring a natural gas pipeline to the Lower 48.

Another option is converting the gas to a refined liquid that could flow down the oil pipeline.

Yukon Pacific and mayors of the towns along the oil pipeline want to build a pipeline to Valdez and sell the gas as LNG.

Under the LNG process, gas is cooled to minus 260 degrees, where it turns into a liquid. The gas would be shipped on special tankers and then, at its destination, be converted back to gas for consumption.

Yukon Pacific's project still hinges on selling much of Alaska's gas to Asia, Lowenfels said, but an alternative West Coast market would provide some flexibility.

Transportation costs would be about 25 percent lower than to the Far East.

Lowenfels envisions a market in Mexico for the intense cold released when LNG is warmed to air temperature. Cold air could be used for refrigeration or to chill electric turbines at power plants.

Despite Mexico's huge oil and gas reserves, the nation is a net importer of natural gas, said Arvind Sanger, an oil and gas industry analyst with Donaldson, Lufkin & Jenrette in New York City.

Many of Mexico's imports come from Southern California to feed the Tijuana region.

Using Mexico as a point of LNG import would allow Yukon Pacific to dodge California environmental safety concerns and boost supplies on both sides of the border, Sanger said.

LNG is common in Asia, but given North America's rich reserves and the costly plants and tankers needed in an LNG project, it remains rare in the United States. It accounts for less than 1 percent of supply, according the Energy Information Administration.

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