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$65 Billion Price Tag for Alaska Liquefied Natural Gas Megaproject

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(Photo: Stock.xchng)
(Photo: Stock.xchng)

BUSINESS

  • Scope of 10-year LNG megaproject includes storage tanks, liquefaction plant and 1,300-km pipeline
  • Sale of natural gas from North Slope could bring in up to $20 billion in annual revenue
  • Alaskan officials anticipating project will help region dominate global LNG industry

Oil & gas leaders Exxon Mobil Corp, BP Plc and ConocoPhillips along with energy leader TransCanada Corp project expenses to total between $45 billion and $65 billion for their new megaproject, which serves to export liquefied natural gas (LNG) from Alaska’s North Slope to international markets.

The three oil producers agreed in March to collaborate with TransCanada on this project of “unprecedented scale and challenge.” It may take more than 10 years to construct the megaproject’s storage tanks and liquefaction plant as well as the 1,300-kilometer (800-mile) pipeline from the North Slope to the southern coast of Alaska carried over from a 2010 TransCanada proposal.

LNG Job Creation

While the resources required for this venture (as much as 15,000 workers and 1.7 million tons of steel) will be high, the state could benefit from the creation of 1,000 permanent jobs as the LNG project is expected to ship between 3 billion and 3.5 billion cubic feet of gas daily.

It is believed that the North Slope contains 35 trillion cubic feet of known gas deposits, largely found in the Prudhoe Bay Field, and over 200 trillion cubic feet of undiscovered reserves.

The Alaskan government and energy companies are hoping to combat the decline in North Slope oil output and profit from the region’s extensive gas reserves.

The sale of natural gas from the North Slope could bring in up to $20 billion in revenue annually if the International Energy Agency’s prediction of Asia as the leader in a 17% increase in demand for gas worldwide from 2011 to 2017 rings true.

Previously, Exxon and TransCanada were looking to transport gas through western Canada to the US market via a $41 billion overland pipe as shale field production caused a gas glut. However, given a lack of buyers in the south, the companies decided to concentrate on the growing Asian market.

Similarly, BP and ConocoPhillips decided to abandon Denali, a proposal for a $35 billion pipeline transporting North Shore gas to Alberta, and join this undertaking.

Alaska LNG Megaproject’s Competitive Edge

Dan Sullivan, Alaska’s Natural Resources Commissioner, stated that the size and expense of the Alaska LNG project was comparable to projects such as the $37 billion Australian-based LNG project carried out by Chevron Corp, called the Gorgon Project.

However, in his view, Alaska LNG presents Asian customers with many advantages relative to the competition. For one thing, unlike possible BC-based LNG competitors, Alaska has resolved political issues like First Nations claims to land.

For another, unlike other US locations, Alaska does not face strict export license and regulatory concerns, and holds the only running location for US LNG exports – the Kenai, Alaska plant owned by ConocoPhillips, which has shipped LNG to Asian customers since 1969.

Another advantage is that the company’s close proximity to Asian markets relative to competitors could lower shipping costs. Alaskan officials are thus anticipating that this project will enable them to dominate the global LNG industry and ship North Slope gas internationally for the first time since initial, failed attempts in the 1970s.

Key Statistics - Liquefied Natural Gas Industry- (source: Alaska Natural Gas Transportation Projects)

  • The demand for LNG has increased by 140% worldwide in the last 12 years and now makes up around 10% of global methane consumption.
  • Nineteen countries currently export LNG.
  • In 2011, LNG producers generated 32 billion cubic feet of LNG each day.

By Christelle Agboka for
Christelle Agboka is a freelance journalist based in Kingston, Ontario, who covers business and economy news.

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