State and oil companies OK another year of LNG pursuit

This illustration shows what a liquefaction plant could look like. (Source: Alaska LNG)
This illustration shows what a liquefaction plant could look like. (Source: Alaska LNG)

The Alaska LNG gas line project will continue for another year.

The state and its three oil company partners – ExxonMobil, BP and ConocoPhillips — voted unanimously late Thursday afternoon to continue work on the project, which aims to bring natural gas from the North Slope to the Kenai Peninsula for export.

All four partners had to approve the 2016 budget by Dec. 4 for the project to continue.

That budget for the coming year totals more than $230 million for planning and design work. It’s a significant addition to the $350 million spent to date, though just a fraction of the estimated $45 to $65 billion it will cost if the pipeline is eventually built.

Project spokesperson Kim Fox called it a milestone in Alaska’s long quest for a natural gas pipeline.

“It allows us to move forward with the work that we’ve undertaken over the last 18 months, it allows us to continue to see progress on this project,” Fox said. “And it’s certainly a very significant day for all of the 130 people who are working on the project team.”

Alaska’s share of the total comes to about $60 million. The board of the Alaska Gasline Development Corporation — which represents the state in the project — unanimously approved that amount, but only after delaying the vote twice to give state negotiators more time to hammer out agreements with the three oil companies.

Acting chairman Dave Cruz said board members wanted to make sure they made the right call.

“Working both with the Parnell administration and the Walker administration, a lot of times things are the 11th hour and the 58th minute,” he said. “We have to make certain that the deals are right…This is huge dollars and it’s Alaska’s future.”

The state’s decision was originally expected Nov. 21 — and initially, a ‘yes’ vote had seemed like a foregone conclusion. But in the hours leading up to that meeting, Gov. Bill Walker removed two board members, and oversaw the ouster of the corporation’s president. The governor said he didn’t want the state to approve any more work until he had commitments from all three North Slope producers that should one of them withdraw, they wouldn’t scuttle the project by withholding the natural gas they control.

After the board’s vote Thursday afternoon, the governor’s office announced it had agreements with BP and ConocoPhillips — though not with ExxonMobil.

That, however, seemed to be enough. Cruz said board members sought assurances from everyone — other state agencies, outside stakeholders, and above all the three producers — before taking their vote.

“Remember, if anybody pulls out of this, the deal’s done. That’s how critical this is,” he said. “So, do you go in first, or do you sit back and make sure everybody’s driving their car over to that meeting, or they’re all sitting in the seats?”

The plan for the coming year calls for preliminary engineering,  design, and permitting work only, a phase called pre-FEED (pre-front end engineering and design). No final decision on whether to actually build the pipeline is expected before 2018.