LNG consortium files application for export license

  • By Tim Bradner
  • Monday, July 21, 2014 1:05pm
  • News

The consortium planning the big North Slope gas pipeline and liquefied natural gas export project has taken another big step.

An application was filed Friday for the U.S. Department of Energy export permit for the project. North Slope producers, TransCanada Corp. and the state of Alaska asked for permission to export up to 20 million metric tons yearly of liquefied natural gas, or LNG, from Alaska, the group announced in a press release.

Larry Persily, federal Alaska gas coordinator in the U.S. Department of the Interior, has reviewed the 212-page filing and said the consortium has purchased about half the property it needs for a large LNG plant at Nikiski, or about 200 acres.

The filing application is for permission for exports over a period of 30 years to countries that have existing free trade agreements with the U.S., as well as to non-free trade agreement countries, according to the announcement, which was released Monday.

“This is a significant milestone for the Alaska LNG project and demonstrates continued progress toward developing Alaska’s resources,” said Steve Butt, senior project manager. “Filing of an export application is a critical step in commercializing North Slope natural gas.”

Butt said in an interview earlier that the project specifications of exporting 15 million to 18 million tons per year haven’t changed but that the consortium is asking for permission to ship 20 million tons per year to leave a margin for growth. The project would process 3 to 3.5 billion cubic feet of gas produced on the North Slope and would convert 2.2 billion to 2.5 billion cubic feet per day into LNG. 

The difference between the gas produced and the gas converted to LNG is the amount used for fuel and for supply of gas to Alaska communities, which is estimated at about 400 million to 450 million cubic feet per day for maximum winter demand, which is the amount the project designers must use for planning, Butt said.

The filing follows the signing of a Joint Venture Agreement among the parties on July 2 to fund $500 million for pre-front-end engineering and design for the project. The overall project is now expected to cost $45 billion to $65 billion.

The pre-FEED study, which is expected to be completed in late 2015 or early 2016, would provide an updated cost estimate, Butt said in an interview. If the results of the “pre-FEED” are favorable the parties would proceed in 2016 to the full Front-End Engineering and Design, which could cost between $1 billion and $2 billion. 

Final investment decisions on construction could come in 2019, which would have the project in operation in 2024 if it proceeds, he said.

An economic study by NERA Economic Consulting was submitted in support of the application citing “unequivocally positive” economic impacts in Alaska and the United States. Benefits to the nation must be quantified if the government is to allow the exports. The project is anticipated to create up to 15,000 jobs in Alaska during construction and would require about 1,000 for operations, according to the announcement made Monday. 

The proposed project facilities include a liquefaction plant and terminal in the Nikiski area on the Kenai Peninsula; an 800-mile, 42-inch pipeline up to eight compression stations and at least five take off points for in-state gas delivery and a large gas treatment plant on the North Slope.

Butt said the consortium has purchased property at the Nikiski site for the LNG plant. 

“We’ve purchased quite a bit of what we need but we would like to have more,” he said in a July 17 interview.

“We’ve said we would like to have 400 to 500 acres for the plant but we would really like more because we will need ‘laydown’ (storage) space for materials and equipment and also an area for fabrication,” he said. 

About 3,500 to 5,000 construction workers might be needed depending on how the plant is designed, Butt said, and “several hundred” for operations once the LNG plant is built and operating. The operations workforce will depend on how decisions are made to configure the plant, he said.

The North Slope gas treatment plant would be another mega-plant built as a part of the pipeline and LNG project. The treatment plant might require as many as four summer “sealifts” to move modules and other equipment by sea to the slope, Butt said. Some of the modules will be very large, up to 8,000 tons. Modules shipped to the slope in prior sealifts have usually ranged in the 3,000 tons to 5,000 tons in weight.

Although the large modules would be built outside Alaska and shipped by barge to the slope, a great number of smaller module units will also be needed and many of those would be built at Alaska fabrication sites, he said.

Meanwhile, this summer about 250 people are employed in field work to gather data along the planned pipeline right-of-way with most of the effort focused on the southern half of the proposed line from Livengood near Fairbanks to Cook Inlet, Butt said. The work includes archeological and cultural surveys. 

“People are literally walking the right-of-way,” Butt said. Eighty percent of the hired for the summer field program are Alaskan, he said.

The major pipeline river crossings at the Yukon and Susitna rivers are still technical challenges. However, depending on which of three planned southern routes is chosen the Susitna crossing might be avoided so that the pipeline remains on the river’s east side. That would require a Cook Inlet crossing further north, however. 

The inlet crossing itself does not pose a major construction problem because there are already many pipelines in the inlet and a great deal of knowledge within the industry. However, endangered beluga whales in the inlet are a concern and construction would have to be timed do as to have a least impact, he said.

The state of Alaska is participating in the project through the state-owned Alaska Gasline Development Corp. The project agreement is structured so that the three major gas producers, BP, ExxonMobil, ConocoPhillips as well as TransCanada, a pipeline company, would own the large North Slope gas treatment plant and the gas pipeline. However, the state has an option to purchase 40 percent of TransCanada’s share, although that option must be exercised in 2016. 

The state will meanwhile own 25 percent of the LNG plant at Nikiski through the AGDC, with the three producers owning the other 75 percent. TransCanada will have no share of the LNG plant.

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