LNG panel disbands after 3-year effort

Posted: Thursday, November 29, 2001

FAIRBANKS (AP) -- An oil industry group has dispersed after failing to find a cost-efficient way to export liquefied North Slope natural gas in tankers.

Members of the group included Phillips Petroleum, BP, Foothills Pipe Line Ltd. and Marubeni Corp. Their mission when forming three years ago was to study how to transport natural gas reserves through a pipeline to Valdez or Nikiski.

The gas would then be liquefied and placed on tankers for shipment to Asia, Mexico or the West Coast of the United States.

Members of the group have returned to their respective companies, Phillips Petroleum spokeswoman Dawn Patience told the Fairbanks Daily News-Miner this week. Patience said that each of the companies will individually gauge the information gathered from the studies and decide whether to further pursue a liquefied natural gas project.

The group's work began in October 1998 with an attempt to design a cost-effective project for liquefied natural gas, also known as LNG.

''In stage 1 we assessed that the project was not economic, '' Patience said. ''Stage 2 focused on ways of driving down the risks and the costs.''

That second stage began in the summer of 2000, and the studies are now completed. The commercial manager for the sponsor group's work came from Phillips Petroleum.

Patience said some improvements were found in that second stage of work but the cost reductions were not sufficient, at least in the analysis of Phillips officials.

A separate oil industry consortium -- consisting of BP, Exxon Mobil and Phillips Petroleum -- is in the midst of studying whether the construction of a natural gas pipeline from the North Slope to market in the Lower 48 would be economically feasible.

But, no matter what route a gas pipeline to the Lower 48 takes, most of it would run through Canada.

So an LNG line from the North Slope to Southcentral Alaska for export in tankers is often heralded as an ''all-Alaska option.''

''If we build the all-Alaska gas line to Valdez we have the opportunity to reap the highest economic benefits and opportunities, bar none,'' said Scott Heyworth, who chairs a group called the Citizens Initiative for an All-Alaska Gasline.

Heyworth is pushing a ballot initiative to create a state gas authority to pursue the development of such an LNG line.

Heyworth, as well as some members of the Alaska Legislature, question the oil industry's continued assertion that the LNG pipeline would not pencil out. ''I want to see their numbers,'' Heyworth said.

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