Alaska’s state-run development agency has OK’d a $50 million backstop for the Alaska LNG Project’s next step. The money will act as a sort of insurance policy for whichever company might take on the work.
Frank Richards is the president of the Alaska Gasline Development Corporation. That’s the state corporation overseeing the project. Last week, he told the Alaska Industrial Development and Export Authority, or AIDEA that the new work would update engineering and design from the last time it seemed like the pipeline project was moving forward – in 2015.
“This will allow us to essentially bring that cost estimate up to current dollars – 2025 dollars if we’re able to proceed here very quickly,” he said.
If it’s built, the Alaska LNG Project would move natural gas through an 800-mile pipeline from the North Slope to a liquefaction facility in Nikiski. From there, the gas would be shipped overseas, most likely to Asian markets.
The $50 million is an up-to amount that Richard says might not be needed. He says the corporation is in talks with an unnamed company that wants to minimize its risk, in case the project doesn’t move forward after the engineering and design updates are done.
“They would like to make sure that there is a backstop, meaning that they would be paid should the project not take the next logical step, which is final investment decision,” he said.
AIDEA’S resolution says the backstop aligns with the authority’s mission to support delivery of Alaska’s natural gas resources.
When questioned by AIDEA board members about what’s changed this time around for the project, Richards pointed to an agreement reached this summer between AGDC and Pantheon Resources plc. Richards says the agreement eliminates the need for a $12 billion treatment plant previously included in the project scope because of the gas’ low carbon dioxide content.
“Only about .5%, or one-half of one percent, of the gas constituent is carbon dioxide,” he said. “Therefore it can flow directly into a pipeline, meet the existing utility specifications in terms of CO2 content, it doesn’t require that large plant and it saves nearly 20 to 25 miles of pipeline from the overall cost of the project.”
During the meeting, AIDEA Chair Dana Pruhs said the backstop is a positive development.
“I want to remind everybody that, you know, AIDEA’s mission is – it's not risk-free,” he said. “We take a look at individual projects and obviously scrutinize it as best we can. But at the end of the day, you know, this organization is designed to be able to look at that and take some of that risk.”
AGDC spokesperson Tim Fitzpatrick said Wednesday the name of the company won’t be released until an agreement is finalized.
AIDEA’s backstop would only cover updates to pipeline construction. The full project was broken into two phases at Gov. Mike Dunleavy’s request earlier this year. The first phase includes building the pipeline and is estimated to cost around $11 billion. The second phase covers the project’s gas export facilities and fills out the rest of the project’s $44 billion price tag.
