Since the state announced Nikiski as the chosen site for its liquefied natural gas plant project about six years ago, Kenai Peninsula residents have had an ear to the ground for developments. The project would use an 807-mile pipeline from the North Slope to deliver natural gas to a plant in Nikiski, where it would be liquefied and shipped out to international markets, all for a price tag of about $45 billion.
Since 2017, the state has been heading up the project alone through the Alaska Gasline Development Corporation. The project partners, including ConocoPhillips, BP and ExxonMobil, shied away from it after a number of international LNG plants came online, pushing down prices and making Alaska’s project too expensive to be competitive. But the state has pressed on, gathering permits and information. On Thursday, the Federal Energy Regulatory Commission gave the state the green light to build and operate the project.
Now it’s just a matter of how to pay for it. This is the last year the state is going to go it alone —it’s either find other sponsors or sponsors or sell the assets.
AGDC spokesman Tim Fitzpatrick says it’s one of Gov. Mike Dunleavy’s goals to shift direction of the project to the private sector.
“The state doesn’t have the resources or the wherewithal to take on a project of this magnitude but there’s plenty of players in the global LNG market that do and there may be a continued roll for the state as far as accessing advantageous financing and other ways to materially benefit the projects without actually being the operator or constructor of it,” Fitzpatrick said.
The AGDC’s strategic plan is to transition to a new project sponsor or sponsors by Jan. 1, 2021. The corporation plans to go first to the companies it’s been working with closely, including BP, ExxonMobil and other groups that have expressed interest. If those groups aren’t interested, the corporation will open up solicitation to others. If there’s still no one interested, the AGDC plans to put the project’s assets up for sale through a formal request for proposal process.
The state will likely still be involved in the project, but how that role looks is still uncertain.
The project’s price tag and the relatively low LNG prices caused the producer partners to withdraw from funding it in 2017. One of the ways the AGDC hopes to bring sponsors back in will be by reevaluating the cost, which was last estimated in 2015.
“AGDC is working with a company, Fluor, who’s got a lot of expertise in this area, as well as experts from BP and ExxonMobil to update the 2015 cost number which was the $44 billion figure and see what ways we can make the project cost more competitive on the world stage,” Fitzpatrick said.
With new technology and market factors, the hope is to push down that cost and make the end product cheaper and therefore more marketable.
