Alaska LNG advocates see reasons for optimism, but some industry watchers still skeptical

The Alaska Gasline Development Corp. is moving ahead with plans to build an 800-mile natural gas pipeline by the end of the decade.
Published: Jun. 22, 2022 at 4:59 PM AKDT
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JUNEAU, Alaska (KTUU) - The Alaska Gasline Development Corp. is moving ahead with plans to build an 800-mile natural gas pipeline by the end of the decade from the stranded reserves on the North Slope to a yet-to-be-built liquefaction plant in Nikiski.

The $39 billion Alaska LNG project has been dreamed about for decades, but supporters say that Russia’s invasion of Ukraine, which has helped send energy prices soaring, has made it a more attractive prospect for Outside investors.

Late last month, Gov. Mike Dunleavy traveled to Japan with Alaska Sen. Dan Sullivan and Frank Richards, head of the AGDC, on a trade mission to pitch the project to private investors and Japan’s government. Richards said the Alaska delegation received a positive response.

“They have a lot of needs for energy, but they don’t have energy sources,” he added.

Dunleavy noted that Japan has been importing natural gas from Nikiski for 50 years. He said through a prepared statement that Alaska’s gas could play a role in helping the Asian country transition to using cleaner sources of energy.

During the Japan visit, there were discussions about exporting “blue” ammonia from Alaska to Japan, which is used to clean up coal power generation, and talks about Cook Inlet’s significant potential for carbon sequestration.

And there are other reasons for cautious optimism that the natural gas pipeline could finally be built. Two years ago, the Alaska LNG project got the federal authorizations it needed to start construction and Congress approved a $27 billion loan guarantee last November as part of the infrastructure bill.

Wood Mackenzie, an energy consultancy firm, analyzed the LNG project in 2016 and found that Alaska’s plan was “not competitive.” Another analysis by the same firm at the beginning of the year suggested the project’s potential has significantly improved due partly to the federal loan guarantee helping to reduce cost estimates.

Richards agrees that “Alaskans have heard this story many, many times before,” but he suggested that this time, it could be different for the natural gas pipeline. There are concerns in Europe that Russia could turn off the gas supply this winter, and the U.S. is seen as a more trusted and stable energy producer.

“The reality is that we have a tremendous interest that’s developed in our project,” Richards said.

He explained that the state-owned gas line corporation has received letters of interest from potential investors and pipeline developers such as Enbridge, Inc., a Canada-based firm. The corporation is hoping to announce final investment decisions in 2024, and hire thousands of Alaska workers to help begin producing gas for Alaska consumers two and a half years later.

The goal then is to have an average of 3.5 billion cubic feet of natural gas running through the newly-constructed pipeline each day ready for export by 2030, but some long-time industry watchers remain skeptical.

Roger Marks, an Alaska-based economist, penned an opinion piece in the Anchorage Daily News on Wednesday, saying the pipeline is not close to being built despite the optimism. Larry Persily, who was the federal gas coordinator during the Obama administration, is similarly dubious.

“Letters of introduction, letters of interest, memorandums of understanding; those are like exchanging business cards,” he said. “There’s never a check attached to any of them, for good reason.”

Persily said the market is currently in “a panic,” but that doesn’t necessarily mean investment will come for a project that won’t produce natural gas until the end of the decade. He explained there are more attractive investments for natural gas around the world, and he is doubtful about the $39 billion cost estimate with high inflation and increasing costs for construction.

Independent former Gov. Bill Walker, who is running for reelection, has been a long-time advocate of an Alaska natural gas pipeline. He traveled to China in 2018, partly hoping to secure investment in the project. A non-binding China deal was reached before being scrapped by the newly-elected Dunleavy, who Walker says should have been pursuing the project much more aggressively over the past four years to see it move forward.

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