Low energy prices a double-edged sword for industry

This illustration shows what a proposed gas treatment plant on the North Slope could look like. (Courtesy of Alaska LNG)
This illustration shows what a proposed gas treatment plant on the North Slope could look like. (Courtesy of Alaska LNG)

Low energy prices may help Alaska LNG compete against other prospective natural gas export projects around the world.

BP Business Development Director for Alaska LNG, Damien Bilboa says the depressed market is a double edged sword for the industry.

“Thirty dollars a barrel, everyone’s challenged. I’ve seen numbers that suggest the average cost across the Slope break-even price is around $52,” Bilboa said. “What’s important is we take advantage of this environment to drive the cost of the project to the right point that we capture the deflationary opportunity so that when the market does rebound, and it will, because it does, we have the right project to compete for the buyers on the market.”

Bilboa says that means taking advantage of a competitive contracting environment to trim the estimated $45-65 billion price tag for building the North Slope to Cook Inlet natural gas project.

“To push our cost estimate closer to the $45 billion, so as other projects get cancelled, we have an opportunity to negotiate terms that are more advantageous to the project,” Bilboa said. “That’s one of the unique areas where Alaska LNG may actually be well-positioned in this environment.”

Meanwhile BP, Exxon Mobil, Conoco Phillips, and the state of Alaska continue to negotiate terms to advance the project.

Bilboa says they’re deep into the most complicated aspect of the process, which involves sorting out the North Slope natural gas supply.

“You need to know how much gas you’ll have, how you’ll get it and when you’ll get it,” he said.

Bilboa says the negotiation is common to all gas projects, but is more complicated with the Alaska LNG endeavor because it involves 4 parties and 2 fields: Prudhoe Bay and Pt. Thompson.

Governor Bill Walker has said he wants the negotiations completed this legislative session, but Bilboa downplayed rushing the process, saying the market does not look well on schedule driven projects.