Back from China, AGDC officials await draft environmental report
Alaska gasline officials are preparing for the long-awaited first draft of the $43 billion Alaska LNG Project’s environmental review after returning from an overseas trip to update potential LNG customers and investors on the latest plans for the project.
Alaska Gasline Development Corp. officials expect the Federal Energy Regulatory Commission, which oversees the domestic LNG industry, to publish a roughly 4,000-page draft Alaska LNG environmental impact statement June 28, the last working day of the month.
Interim AGDC President Joe Dubler said during a June 20 board meeting that leaders of the state-owned corporation and members of Gov. Michael J. Dunleavy’s administration had productive discussions with senior development representatives from national Chinese companies that are potential participants in several aspects of Alaska LNG on a trip to Asia earlier this month.
Dubler and AGDC commercial staff traveled to Beijing and Bangkok, Thailand, from June 10-18. They were joined on part of the trip by Brett Huber, a senior policy advisor to Dunleavy as well as Department of Natural Resources Commissioner Corri Feige and Revenue Commissioner Bruce Tangeman.
Dunleavy has long been critical of former Gov. Bill Walker’s plan for a state-led Alaska LNG Project. He made it clear soon after being elected last fall that his administration would slow the pace of the project and try to bring the major oil companies back into the fold.
Officials from Chinese oil and gas giant Sinopec Corp., the Bank of China and China Investment Corp. recognize the benefit of focusing on the regulatory and permitting progress for Alaska LNG as a means to de-risk the project for possible future investments, Dubler said.
The state-owned oil and financial companies signed a nonbinding joint development agreement with AGDC in November 2017 to advance the prospect of financing up to 75 percent of the project in exchange up to 75 percent of the LNG it produces.
At the time, Walker and AGDC leaders were pushing hard to make a final investment decision on Alaska LNG in 2020, shortly after the state would receive a presumably favorable permitting decision from FERC, to capture demand opportunities in the rapidly expanding global LNG trade.
“The message was very well received from (the Chinese representatives) that the governor is keeping the project moving with the producers involved,” Dubler said.
LNG exports to China have declined dramatically this year after retaliatory tariffs were imposed and increased from 10 percent to 25 percent on June 1.
He also stressed that AGDC is no longer pursuing LNG customers or gas supply agreements as the corporation had been under Walker’s plan.
Instead, AGDC is refocusing on the “stage-gate” project development process often used by major oil companies to evaluate large projects. The state, BP, ConocoPhillips and ExxonMobil were in between the preliminary front-end engineering and design, or pre-FEED, and the full FEED stage — estimated to cost $1 billion-plus — of development in 2016 when the producers chose to back away from Alaska LNG project because of depressed global oil and LNG prices.
The international energy consulting firm Wood Mackenzie concluded at the time that the Alaska LNG Project likely wasn’t economic if developed by Alaska’s major producers, as first envisioned, in part because of the high internal return requirements oil companies typically have. However, a state-led project with federal tax exemptions could be viable, Wood Mackenzie said.
The AGDC team also met with officials from Public Company Ltd., known as PTT, Thailand’s national oil and gas company to maintain the relationship, according to Dubler.
AGDC signed nonbinding, early-stage agreements with approximately 15 potential Asia-Pacific Alaska LNG customers and investors from 2016-2018 under Dubler’s predecessor Keith Meyer, according to corporation officials.
Revenue Commissioner Tangeman, a former AGDC finance official, said meetings with the Chinese companies went very well. The primary message from the Alaskans was that the Dunleavy administration is still interested in monetizing North Slope natural gas through an LNG export project, he said, adding that the recent support from BP and ExxonMobil provided the Chinese representatives “a lot of comfort.”
“We’re not interested in doing this (LNG project) at any cost,” Tangeman said in a brief interview. “I think the previous administration’s hurdle was much lower.”
The North Slope producer companies own the lion’s share of the roughly 35 trillion cubic-foot gas resource that would feed the project and both have been providing technical assistance to AGDC since March; BP’s assistance goes back to 2017.
On May 30, Lt. Gov. Kevin Meyer announced BP and ExxonMobil had agreed to contribute up $10 million apiece to help the state pay for completing the FERC licensing process. AGDC leaders expect that will cost roughly $30 million over the next year or more.
The AGDC board approved $20 million in expenditures over the next year to advance the project EIS, which should be finished next June, according to FERC documents.
Dubler noted during the meeting that through April 30 AGDC was operating at 9 percent below its $10.3 million budget for the 2019 fiscal year, which ends June 30. Among other things, the corporation gave up its 6th floor boardroom and some office space in the Midtown Anchorage Calais office building it occupies.
The June 20 board meeting was the first held in public meeting rooms at the state Atwood Building in Downtown Anchorage and was hampered by technical difficulties.
Overall 2019 spending — including corporate operations and Alaska LNG-specific project expenses — is down about $5 million, according to Dubler, who said those cost reductions will continue into 2020.
Elwood Brehmer can be reached at [email protected].