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AGDC lowers cost estimate for AK LNG Project

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AK LNG
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The Alaska LNG Project has been stalled for years, but the Alaska Gasline Development Corporation is hoping a new, lower cost estimate will make it more competitive.

The corporation released the revised cost estimate during a board meeting on Thursday. The new estimate sits at $38.7 billion, about $5.5 billion less than the previous estimate, which was done in 2015. The new estimate was put together by AGDC with BP, ExxonMobil, and Fluor Corporation, a consulting company with experience in LNG.

The main thing hamstringing the Alaska LNG Project, which would pipe natural gas about 800 miles from the North Slope to a plant in Nikiski to be liquefied and then exported, is the cost. A study published by consulting firm Wood MacKenzie in 2017 ranked the Alaska project fairly low in terms of competitiveness, which led to the producers shying away from it and the state taking the lead.

Over the years, the AGDC has worked on finalizing the permits through the Federal Energy Regulatory Commission. The project got that final approval earlier this year. AGDC President Frank Richards said they’ve also been whittling away at that cost.

"The ultimately outcome of this is $37 and a half billion dollars takes us down below the sub-forty," he said. "Again, this isa very large amount of a project, so it still has a ways to go, and there are other opportunities that we’re hoping will bring down the cost of the project."

Some of the items they’ve done to reduce costs include more plant modularization and finding alternative sources for steel. The trade tariffs on Chinese steel increasing the cost for steel impacted the project, but Richards says they’re evaluating the sources for steel and may look to other countries beyond China to keep the cost lower, including the U.S.

Matt Kissinger, the venture development manager at AGDC, told the board the new cost estimate puts the project in the competitive range.

"We’ve actually been able to come up with now a comparatively competitive cost of supply," he said. "What I mean by comparatively competitive is it’s within the range of all the competition."

Tim Fitzpactrick, spokesman for AGDC, said the annual operating cost estimate has gone down as well—it’s at $739.4 million, about $98 million less than the last estimate. The AGDC is going to continue to look for ways to whittle down that cost as well.

"We feel that the new project cost estimate puts us firmly in the middle of the pack of a competitive group of projects under development to deliver LNG to the Asian market, and we feel that AGDC along with our other parties working on the financial analysis are going to look for additional opportunities to improve that cost," he said. "We have identified a number of categories where the cost of the project can potentially be reduced, it’s going to involve additional work for validation and conversations with other third parties, but we think there are other opportunities to continue to bring the project cost down."

This is a penultimate year for the AGDC. The corporation has been heading up the project but is looking for a new project sponsor by the end of this year. If no one comes forward to be the new lead sponsor, AGDC will look for a buyer for its assets.

Click here for the full information about the new cost estimate for the Alaska LNG Project.

Reach Elizabeth Earl at eearl@kdll.org.

Elizabeth Earl is the news reporter/evening host for summer 2021 at KDLL. She is a high school teacher, with a background writing for the Peninsula Clarion and has been a freelance contributor to several publications in Alaska.
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