Site selection is key step forward for Alaskan LNG

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The hugely ambitious venture to construct a $45-65+ billion LNG export project in Alaska continues to gain momentum, with the latest development being the selection of a potential site for the liquefaction plant and terminal. ExxonMobil, BP, ConocoPhillips and TransCanada have selected a location in the Nikiski area on the Kenai Peninsula as the lead site.

It became clear last year that of the two options being considered for monetisation of the North Slope resources – a pipeline to take gas to the Lower 48 states and an LNG export facility – the LNG option is the clear winner. However, implementing an LNG export facility raises considerable challenges at a time when numerous other projects in North America are targeting export markets in Asia-Pacific.

Stranded gas: That said, the issue of exporting what are currently stranded gas resources in Alaska is very different from exporting gas from the Lower 48 states, as it would not have a direct impact on domestic prices there. Indeed, any restriction on exports of LNG from the Lower 48 could work in Alaska’s favour.

“This is a step forward for the Alaska LNG project and shows continued progress toward building Alaska’s energy future,” said Steve Butt, senior project manager. “The work that we have put into the site selection process gives us confidence that the Nikiski site is the lead location for the LNG plant and terminal. The Nikiski site also results in a pipeline route that provides an access opportunity to North Slope natural gas by the major population centres in Fairbanks, Mat-Su Valley, Anchorage and the Kenai Peninsula.”

Still a long way to go: More than 20 locations were evaluated based on conditions related to the environment, socioeconomics, cost, and other project and technical issues. A number of engineering, technical, regulatory, fiscal, commercial and permitting issues still need to be resolved as work on the project progresses.

In February of this year, the companies working on the project delivered their concept for a 15-18 mtpa liquefaction facility to Alaska’s Governor, Sean Parnell (pictured above), an ardent supporter of the project. However, they insisted at the time – and have just reiterated – that “a competitive, predictable and durable oil and gas fiscal environment will be required for a project of this scale, complexity and cost to compete in global energy markets”.

The companies are continuing to refine the project concept, which includes a gas treatment plant located on the North Slope, an 800-mile, 42-inch pipeline with up to eight compression stations, at least five off-take points for in-state gas delivery, and the liquefaction plant and terminal. The liquefaction plant would have three trains, two 160,000 cubic metre storage tanks, and a single loading jetty with two berths.

Detailed engineering: The teams are “currently preparing for more detailed engineering and design work”, say the co-venturers. While Nikiski is the lead site, the project team is still considering other locations. Pipeline routing definition work also continues, following summer field work activities.

The companies say they “remain committed to working with the state to responsibly develop North Slope resources”, adding that “a successful project could provide a host of economic benefits to Alaskans, including state revenues, new job opportunities and access to decades of domestically-produced natural gas for homes and businesses”.

However, at best, it will be years before Alaska gets a new LNG export plant up and running. Pre-FEED (front-end engineering and design) is likely to take up to 18 months, FEED between 2 and three years and engineering, procurement and construction (EPC) another 5-6 years. So first supply is not likely until sometime in the 2020s, at the earliest.