A reality check on LNG progress

  • Thursday, February 18, 2016 5:11pm
  • Opinion

It’s a good time for a reality check.

On Wednesday, Gov. Bill Walker held a press conference with officials from the state’s partners in the Alaska LNG Project, which would transport North Slope natural gas to Cook Inlet via a pipeline, where it would then be liquefied for shipment to Asia. Alaska LNG progress is of keen interest to the Kenai Peninsula as Nikiski has been chosen for the pipeline terminus and the site of the LNG plant.

However, while Gov. Walker has been pushing the producers, BP, ExxonMobil and ConocoPhillips, to come to agreement on a number of issues before the end of the legislative session in Juneau, Wednesday’s press conference — coming on the heels of news that such a time line is unlikely to be met — appears to be an acknowledgment that current fiscal realities are going to be part of the equation.

In other words, the state isn’t the only partner being impacted by low oil prices, and the parties involved are taking a much closer look at the scope and cost of the project before committing to the next phase.

“Economic headwinds are pretty tough right now,” said ConocoPhillips Alaska President Joe Marushack.

Gov. Walker said more will be known in a month as to whether changes to the project structure are needed to keep it going.

While we hate to see the project delayed, we hope the fact that this conversation is happening now is a sign that project partners remain committed to moving forward. AK LNG is currently its preliminary engineering and design phase, which will conclude next fall. The next step is front-end engineering and design, which involves 2 to 3 years and an investment of up to $2 billion. Alaska’s producers are clearly hesitant to make that commitment in the current fiscal climate.

At this point, Alaska has far too much invested to simply walk away — but so do the state’s partners, with officials from each company saying as much during Wednesday’s press conference.

Gov. Walker says he wants to see momentum on the project continue, but the reality is that slower progress is preferable to no progress. It’s far better to adjust expectations now, than to find Alaska with nothing to show for its efforts a year down the road.

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