August 2024, Vol. 251, No. 8
Editor's Notebook
Editor’s Notebook: Alaska’s New LNG Pipeline Push Faces Long Odds
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By Michael Reed, Editor-in-Chief
(P&GJ) – While it remains a long way from becoming reality, the proposed Alaska North Slope pipeline took what could be perceived as a step forward recently when Pantheon Resources announced an agreement to sell natural gas to a subsidiary of Alaska Gasline Development Corporation (AGDC) subsidy.
Pantheon, owner of all the working interest in the Kodiak and Ahpun oil and gas fields, said it will provide up to 500 MMcf/d of natural gas at a maximum base price of $1 per MMBtu in 2024 currency.
(For that to occur, of course, gas would have to be produced from those fields, estimated to be 4.47 Bcf, but let’s not get ahead of ourselves.)
The announcement of the deal came as part of the AGDC’s latest push to build a pipeline that would, in part, relieve an expected shortfall in Cook Inlet gas production, then eventually an LNG export terminal.
“For years, one of the problems that we’ve had with any gas pipeline is getting firm gas sale commitments, and this appears to do that,” project-backer Anchorage Democrat, Sen. Bill Wielechowski, told Alaska Public Media. “It’s a pretty significant amount of gas to get us started, and I think it’s a very positive development.”
Phase 1 of the 44-inch, 800-mile pipeline from the North Slope to the Kenai Peninsula would connect to the Enstar pipeline system at Beluga, according to AGDC. If placed in service, the pipeline would be the longest to become operational in the U.S. since Phillip 66’s success with the 850-mile (1,3680-km) Gray Oak gas pipeline in 2020.
“This agreement solidifies the commercial foundation needed for the Phase 1 portion of Alaska LNG and provides enough pipeline-ready natural gas, at beneficial consumer rates, to resolve Southcentral Alaska’s looming energy shortage as soon as 2029,” said AGDC President Frank Richards, in a statement to the media.
He added that by leading construction with the pipeline, Alaska LNG’s export components will be more appealing for investors and developers. AGDC had said previously that completion of front-end engineering and design would take about 12 months and cost $50 million.
Supporters of the pipeline and related projects boost the idea that the project would mark a big step in making the U.S. more competitive with Russia by enabling shipments of natural gas from the Arctic to Asia.
While all of this sounds good on paper, I would be remiss, however, if I were not to point out that expecting gas production to begin prior to 2030 remains unrealistic. Also, according to some other observers, there remain other significant concerns.
Larry Persily, a long-time proponent of Alaska energy infrastructure and former federal coordinator of the Alaska Natural Gas Transportation, among others, recently told P&GJ that despite the recent developments he feared projects of this type were still facing significant uphill battles.
“The fact that a company with no oil or gas production pledged to put its gas in a pipeline that does not exist, has no investors, financing or customers at the other end of the pipe does nothing to increase the likelihood of the project ever getting built,” Persily said, in a blunt assessment of project.
Others pointed out that funding the effort, despite the presence of state money, would be a far greater challenge than gaining the already in place regulatory go-ahead. They pointed out that “finance people” see far less complicated projects as still being too risky in the 2020’s.
One thing working in the projects’ favor, according to a Wood Mackenzie analysis is that, beginning in 2028, continued strong LNG demand is expected to have created a gap in supply – a gap new projects will need to fill.
According to Alaska LNG, North Slope fields are expected to deliver an average of 3.5 Bcf/d of gas, much of it for an international market. In the process, Alaskans would gain a long-term and affordable source for home heating and industrial needs as well.
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