Declining crude oil production and growing economic challenges make it urgent for Alaska’s business and government leaders to move ahead more quickly on getting a major LNG export project up and running in the state, an American Council for Capital Formation report concluded.
“Alaska has huge natural gas resources and could be a huge global player, but the first movers will have the advantage,” ACCF Senior Vice-Pres. and Chief Economist Margo Thorning said as the group released her study on Aug. 12. “There are a lot of LNG exporters bringing on new capacity, so Alaska needs to seize the moment.”
The state’s economy faces significant challenges, she told reporters during a teleconference. “The unemployment rate in Alaska in June remained substantially above the national level at 6.8% compared to 5.3% for US as a whole,” Thorning said. “Alaska’s population is aging, and declining. So is its oil production, and each barrel is worth significantly less than before.
“Alaska needs to look at other ways to make its economy grow,” she maintained. “Many organizations are projecting low oil prices for the next few years, and we don’t know what will happen if Iranian oil comes back onto the market.”
Thorning said it would take about 8 years to get a large Alaskan LNG export project built and operating. “It seems to me that it behooves Alaska’s economic future if all parties work together,” she said. “Uncertainty about the state’s role will raise the cost of capital when questions are raised about how the project will be structured.”
Among projects which have been proposed, Thorning said that the Alaska LNG project is the most promising. The $45-65 billion project would transport about 3 bcf/d of gas from the Prudhoe Bay and Point Thompson fields on Alaska’s North Slope through an 800-mile pipeline to a liquefaction plant and export terminal at the Nikiski area on the Kenai Peninsula southwest of Anchorage.
There also would be several off-take points along the route for gas to be distributed to communities within the state. Thorning said this could help wean many Alaskans off higher-cost and more polluting winter heating fuels.
The three major ANS producers—ExxonMobil Corp., BP PLC, and ConocoPhillips Co.—are the project’s sponsors, along with TransCanada Corp. and the state-run Alaska Gasline Corp. The US Department of Energy gave the project authorization in late May to export LNG to countries which don’t have a free trade agreement with the US (OGJ Online, May 28, 2015).
“I hope all the parties can work together,” Thorning said. “When I look at Alaska and the challenges it faces, I remember what happened in Michigan during the 1980s. People there didn’t realize the Japanese and other foreign manufacturers were producing better cars at lower prices, and they suffered as a result.
“Thoughtful Alaskans may realize that the same could happen to them if they don’t move more quickly on LNG exports,” she continued. “I hope cooler heads will prevail, and the project will move ahead as quickly as possible.”
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