Following weeks of deliberation, expert testimony, reviews by state departments, public testimony and involved companies, the Senate Resources Committee passed out Senate Bill 138, the Alaska LNG Project legislation.
“This megaproject can offer decades of affordable energy for our citizens. It offers a myriad of opportunities to expand the reach of natural gas products throughout the state and provides jobs during construction,” said Resources Chair Senator Cathy Giessel (R-Anchorage Hillside/Turnagain Arm/N. Kenai). “These jobs are a great and real opportunity for any Alaskan who is fit, willing and prepared to help build this project.”
The bill now moves to the Senate Finance Committee who will take a close look at the financials of the proposed project in detail.
This project has a number of interesting features beyond size, although it is an absolute behemoth capable of shipping 18 million tonnes of LNG per year, 20% larger than Gorgon with a price tag to match of somewhere between $45 and $65 billion.
The scale of the project is awesome, including an 800 mile pipeline that bisects Alaska North to South connecting its Prudhoe Bay reserves with a southern terminal. The financials are also interesting. From the FT:
The project would be a massive feat of engineering, and it might well cost even more than recent mega-projects such as the $54bn Gorgon LNG plant in northwest Australia, or the $48bn first phase of the Kashagan oilfield in Kazakhstan. On the other hand, the North Slope’s gas is in effect free, because it emerges naturally alongside the oil being produced there, and is simply injected back into the field again.
A report for the state late last year argued that Alaska LNG could deliver gas in Asia at a break-even price of about $12 per million British thermal units, which would probably make it rather more expensive than the expected cost of gas shipped from the new export projects being developed elsewhere in the US, in states such as Texas and Louisiana.
$12mmbtu break even makes it comparable to Australia’s magnificently expensive seven so this represents another price cap preventing larger returns for our projects.
Another interesting element is that the project is to be part funded by the Alaskan tax-payer who will take a 20% equity stake, somewhat reminiscent of our own RSPT though far more direct. The other partners are Exxon, ConocoPhillips and BP.
The project will still need to get DOE export approval but because it’s not connected to the US mainland it isn’t so beholden to anti-US gas export interests.
It’s got a long way to go yet but plans to produce in the early 2020s. Our investment window is shut.