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Southcentral gas takes priority ANGDA shifts focus from LNG plant to seeing North Slope spur line built

Posted: Wednesday, December 01, 2004

The Alaska Natural Gas Development Authority, the state corporation formed to build a gas pipeline from the North Slope to Valdez and a large gas liquefaction plant in that coastal community, is now focusing its short-term effort on getting gas from the slope to Southcentral Alaska.

"We think it is a top priority. It's also one of the governor's top priorities, and he's my boss," Harold Heinze, executive director of the authority, told members of the Resource Development Council's "Resources 2005" conference in Anchorage on Nov. 18.

Heinze also spoke Nov. 17 to the Alaska Support Industry Alliance.

The decline in Southcentral Alaska gas reserves and Agrium Corp.'s difficulties in getting gas for its ammonia and urea fertilizer at its plant in Nikiski has caused the authority to shift priorities, at least for the near term.

"The recent Department of Energy study highlighted the Cook Inlet gas situation, which is precarious. There are implications for Agrium, the Kenai LNG plant and all of us living in Southcentral," Heinze told the Alliance.

Exporting liquefied natural gas (LNG) from the North Slope remains a long-term mission, but Heinze said the authority must do more work to "right-size" the project to make it competitive.

A study by a consulting firm done for the authority earlier this year showed that a large LNG plant built in Alaska would be more expensive than thought, Heinze said.

"Building a large plant could require 30 million man-hours of construction over two to three years. That will involve a lot of people, and Alaska labor is not cheap," he said.

Competing projects overseas have access to lower-cost labor, Heinze said.

The authority plans to let another contract for a study of how to reduce the scale of the LNG plant. "There are risks in the LNG market as well as in the construction cost," Heinze said, and a rescoping of the project may reduce the risk profile.

The more immediate priority is getting gas to the Anchorage and Kenai areas, Heinze said.

"Getting North Slope gas to Cook Inlet would be a modest-size project that would create a lot of benefits," he told the RDC.

An immediate project for the authority will be to file a right-of-way application for a 24-inch "spur" pipeline from Glennallen to near Palmer, north of Anchorage, where a link can be established with an existing pipeline owned by Enstar Natural Gas Co.

Heinze said the authority may be issuing up to four contracts for consultants and contractors to assist with the application.

Another entity might wind up building the spur pipeline, but having the corridor established will accelerate the process, Heinze said.

Originally, the idea was for the spur line to tie in at Glennallen to a large-diameter pipeline from the North Slope to Valdez.

If that pipeline isn't built, Heinze said the spur could be extended north to link with a large Alaska Highway pipeline near Delta.

Even if the Valdez pipeline is not built, it might still be more economic to build a spur pipeline via Glennallen to Delta to link with the highway pipeline rather than build a spur line from Fairbanks south to Anchorage, Heinze said.

That's because with the Delta option, the North Slope gas would be able to travel farther for less cost in a large-diameter, high-pressure pipeline and would have a shorter distance to travel through a smaller spur pipeline, he said.



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