Pipeline could spur interest from new investors The state’s Alaska Gasline Development Corp., or AGDC, has put forth a new phase one plan for its project to build a natural gas pipeline from the North Slope. It’s a concept of building the pipeline an initial phase to meet the emerging short-term need for gas in Southcentral Alaska and with the export liquefied natural gas plant in a phase two. Frank Richards, AGDC’s CEO, outlined the idea in a Feb. 26 briefing for legislators in Juneau. A rough cost, working off AGDC’s estimates for the entire project, is $10.7 billion. The idea would be to build the 42-inch pipeline without the compressor stations or the large North Slope gas treatment plant that are part of the larger project, to reduce costs. Since there would be no large liquefied natural gas, or LNG, export plant on the Kenai Peninsula in phase one, there is no need for a Cook Inlet crossing for the pipeline, another cost saving. The new pipeline would connect with the Enstar Natural Gas Co.’s existing pipeline system in the MatSu Borough. The conceptual plan involves utilities to sign up for gas as well as a major industrial customer. AGDC is talking with Nutrien, owner of the mothballed fertilizer plant on the Kenai, as a potential industrial customer, Richards said. Gas would move to that plant through Enstar’s pipeline from the terminus of the new 42-inch pipeline in the MatSu. Under this plan ADGC would sell North Slope gas delivered through the pipeline to utilities and Nutrien at or below the cost of imported LNG shipped to Alaska from the Lower 48. That is pegged at about $15 per million cubic feet, about twice what Cook Inlet gas now sells for. Imported LNG appears the best near-term solution for meeting the gas supply gap in Southcentral, the utilities have said. Richards said getting the pipeline built, assuming it can be done, will make it easier to bring investors for the bigger project because would leave only the LNG plant at Nikiski and the gas treatment plant on the slope to build. If the pipeline-only plan could come together one year of final engineering is needed with four years of construction. First gas could be delivered in 2029. AGDC says $50 million is needed to do Final Front-End Engineering and Design, or FEED, for the pipeline, and a source of funds is needed for that. Gas sales contracts with North Slope producers also must be finalized. Nutrien would also have to commit to rebuilding its Nikiski fertilizer plant. One of the uncertainties facing the “pipeline first” plan for North Slope gas is the commercial structure of the project. Gov. Mike Dunleavy said he wants the private sector to take the lead in the gas project with the state having only a role as facilitator. However, attracting a private investor to the slimmed-down phase one may be a challenge given the narrow customer base, which would be the utilities and possibly Nutrien as an industrial customer. Because of this, state financial backing may be needed. Another issue is that serving Fairbanks with gas will require a separate lateral pipeline because the approved route of the large pipeline is west of the community. The lateral pipeline is not part of the Alaska LNG Project and absent a state subsidy the lateral will have to be financed by a tariff on gas shipped and used by Interior consumers. Despite that, a big advantage of the North Slope gas pipeline, even in a phase one, is that all permits and rights-of-way have been approved. As for President Biden’s well-publicized ban on U.S. LNG exports, that won’t apply to Alaska LNG. That’s because the federal export permit is already signed unless the president were to revoke it, which is considered highly unlikely. — Tim Bradner Linking Alaska’s Resources to Alaska’s People 22 2024 Meet Alaska Conference & Trade Show AGDC proposes North Slope gas to Southcentral first
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