Governor Bill Walker was in Kenai Tuesday promoting the state’s biggest planned infrastructure project, the AK LNG line.
Walker talked about his recent trip to Asia with President Trump and other administration officials to sign memorandums of agreement with China to be a future buyer of Alaska’s natural gas. Alaska Gasline Development Corporation president Keith Meyer was on hand as well, to discuss where the project is now and what its prospects are in the near future.
Governor Walker has been a champion of the AK LNG project throughout his time in Juneau. And as the project’s ownership and developing partnerships have changed. But he told a joint meeting of the Kenai and Soldotna Chambers of Commerce that recently signed non-binding agreements between Alaska and China represent the farthest point in development yet.
“This is different. I don’t think anything we’ve ever done in the past involved this level of buy-in," Walker said.
"We’ve gone from a regional project to a statewide project to a national project to an international project. This is a project that has major international significance; $8-$10 billion a year in offset of trade.”
The Trump administration is looking for big infrastructure projects, China is looking for cleaner energy. Everyone wins, right? Well, maybe.
Despite the billions that have been poured into AK LNG already, Alaska Gasline Development Corporation President Keith Meyer says we’re about a year away from signing the next round of documents, representing the next step in actually piping natural gas from the North Slope to Nikiski, then shipping it to Asia.
“By the end of 2018 is when we’re looking at definitive agreements.”
He says in this relationship, Alaska is the party with leverage. Or, at least that’s how it’s being framed.
“The way we are looking at this is they have the opportunity to paper this and to get a piece of the Alaskan project. So we’re really putting ourselves as the prize to win rather than the other way around. They’ve got a good opportunity here. Seventy-five percent of the capacity (of the LNG pipeline) leaves 25 percent for us to look at the other regional markets, which is what we’re doing.”
Those other regional markets are also in Asia. Meyer says they’re eyeing Vietnam as a potential buyer.
“They’re building two LNG terminals, they need a lot of power, the power needs fuel, they want to use gas, which much of Asia does now. This will not be like the China deal, it won’t be a large, integrated kind of a deal, but we see Vietnam as a growing LNG buyer.”
But at what price? A glut of oil and gas has kept prices for both commodities down in recent years. That’s why Alaska’s Big Three oil companies handed over control of the project to the state through AGDC.
Meyer contends that even at current gas prices, Alaska’s relatively close proximity to Asian markets makes it competitive. And never mind the Russians, and their gas lines.
“We can beat the Russians all day long. It’s the Texans we’ve got to worry about, not the Russians. So LNG, the marker that people are looking for is about $8 (per million cubic feet) on the beach of Asia. A lot of other LNG is sold on a percentage of oil. The percentage is about 12-14 percent times the price of oil. So if oil were at a $100 and it was 12 percent, that’s $12. It’s not $100, it’s $63 or so. So that (LNG price on delivery) still is about $8. That’s what we’re looking at and we compete very well at that level.”
Walker says it stands a better chance as an infrastructure investment than another page in the portfolio for the oil companies.
“When (the oil companies) asked us if we would take it over, they said you as the State of Alaska will get a tax-exempt ruling perhaps, if you apply for one. We applied for one, we received one. That’s a benefit. The goal is to bring down the cost of the project as much as possible, bring down the cost of the operation as much as possible, to be able to compete with other projects.”
As AGDC gets to the work it has cut out for itself, it is also planning for more community meetings in Nikiski, where the 800-mile pipeline will end and where residents are nervous about the impacts of such a massive project. The next meeting is tentatively scheduled for sometime in February.