New proposed LNG project would ship gas from North Slope to Asia on ice-breaking tankers

Point Thomson is approximately 60 miles east of Prudhoe Bay. (Photo courtesy ExxonMobil)

A new company headed by former Alaska Lt. Governor Mead Treadwell announced Wednesday it wants to ship liquefied natural gas from the North Slope to Asian markets. Qilak LNG plans to partner with Exxon to ship LNG on ice-breaking tankers from Point Thomson.

Since the 80s, energy companies have dreamed of shipping LNG through Arctic waters, but climate change has made the prospect more feasible in recent years. David Clarke is President and COO of Qilak. 

“Over the last three and a half decades, we’ve seen a significant reduction in the amount of sea ice. And also in the nature of that ice, there’s much less multi-year ice and a lot more first-year ice in the Arctic.”

Clarke, a former BP project manager, says the Russian Yamal LNG project has had success since it began exporting gas two years ago. Since then, they’ve sold gas to markets in both Europe and Asia, and that gives Qilak confidence that the Alaska project would be financially feasible.

Clarke also says Qilak’s project would be much cheaper than the proposed Alaska LNG pipeline project

“By eliminating the 800-mile pipeline, we can reduce the cost to about two-thirds,” Clarke said.

Early estimates are that it would cost about $5 billion. 

Another difference between Qilak and AKLNG is that the new project would not need state funding. Qilak is a subsidiary of Dubai-based Lloyds Energy, which has been focused on LNG since forming in 2013.

Larry Persily is a former federal coordinator for Alaska North Slope gas development. He says the fact that the project is privately funded may make it more desirable to the general public. 

“This is only the second project I can remember in the past 20 years that didn’t want state money,” Persily said. “So that’s good because the state has spent hundreds of millions of dollars going after various gasline proposals in the last 20 years, so it’s nice someone wants to do it with their own money.”

The proposed in-state Alaska LNG pipeline was a major goal of former governor Bill Walker, but the project has stalled since Gov. Mike Dunleavy was elected. 

Clarke says that the major costs of the project will be constructing the offshore liquefaction plant. He says they plan to lease the icebreaking tankers.

Clarke says they have partnered with ExxonMobil, who has agreed to produce and sell at least 560 million cubic feet per day of natural gas from their Point Thomson field. 

“And that’s enough to generate four million tons a year of LNG, over a 20-year period,” Clarke said.

Mead Treadwell was Alaska’s lieutenant governor under Sean Parnell, and now serves as CEO of Qilak. He says the project is much smaller in scale than the Alaska LNG pipeline project, which estimated 20 million tons of LNG a year.

“To put that in global perspective, last year, 380 million tons of LNG was consumed by global markets,” Treadwell said. “So if you’re trying to sell 20 (million tons), you’re trying to get six or eight percent of the market share of the entire world right off. If you’re trying to sell four, it’s a little less than two percent.”

Persily agrees that having a smaller operation means less risk for investors.

As far as benefits to the state, Clarke says the LNG project would generate tax revenue for the state and North Slope Borough from Exxon as it expands in the region, and provide jobs.  

The project will need to go through a lengthy environmental review process. 

Qilak CEO Treadwell says the company plans on reaching out to environmental groups and local communities to reduce impacts to whaling and subsistence in the area. 

“The environmental impact statement, I’m sure, will look at the effect of shipping,” Treadwell said. “And we’re going to be very careful about noise, we’re going to be very careful about disruption, we’re going to be very careful about monitoring for both seal hunters and whales themselves.”

Persily says that the project has a lot going for it, including not depending on opening up the Arctic National Wildlife Refuge or doing any new lease sales. At this point, he says that the Qilak project is new, and people should let the process play out a bit before jumping to any conclusions. 

“Let the private investors make decisions and let’s not let our infatuation with the notion of North Slope gas drive us to prematurely celebrate,” Persily advised.

Clarke says Qilak has already completed an initial feasibility study for the project, with a more detailed one to start next year. He says, ideally, the project would begin exporting LNG in the mid 2020s.