The State of Alaska and the four companies planning a North Slope LNG export project have signed an agreement that aligns their interests in principle and lays out a roadmap for the project to proceed toward engineering, design and permitting work.
“This agreement is essential to establishing the commercial structure of this project and will allow the project’s investors to move this project — so important to the future of all Alaskans and our broader economy — on a clear path forward,” said Alaska Revenue Commissioner Angela Rodell.
The heads of agreement (HOA) document signed by the state, ExxonMobil, BP, ConocoPhillips and TransCanada details terms for the state to become an equity owner in the estimated $45 billion to $65 billion project and the next steps to move the work forward.
“This commercial agreement, with its transparent set of terms, is Alaska’s roadmap to developing our vast gas reserves,” Alaska Gov. Sean Parnell said. “This is truly a historic achievement. Not only have all the necessary parties aligned around a single project, but we’re moving forward with a project that’s on Alaska’s terms and in Alaskans’ interest.”
The HOA says the LNG export project is in a pre-front-end engineering and design, or pre-FEED, phase. Before fully ramping up the $400 million phase over the next 18 months or so, the parties to the HOA are looking to Alaska lawmakers to enact legislation that would allow certain terms of the HOA to be finalized into a more definitive contract between the parties.
The more definitive contract terms, subject to later legislative ratification, would include a state investment for 20- to 25-percent ownership of the project with the state taking its royalty gas and gas taxes in the form of natural gas itself, rather than as cash, and certain other terms.
The pre-FEED work is expected to ramp up in the second quarter of 2014 and is anticipated to take between 18 and 24 months to complete, with a determination on proceeding to the FEED phase expected to occur within approximately 36 months after ramp up of pre-FEED, according to the HOA. The purpose of pre-FEED is to progress technical work that would provide each of the Alaska LNG parties with sufficient information for evaluating the technical, cost and schedule aspects of the Alaska LNG project.
The Alaska LNG project anticipates piping 3 billion to 3.5 billion cubic feet a day from Alaska’s North Slope fields. After gas consumed in state and at the liquefaction plant, approximately 2 billion cubic feet a day would be exported as LNG to Asian markets.
Besides commercial terms, the HOA addresses the hiring of Alaskans, use of Alaska businesses during construction, pro-viding at least five off-take points along the pipeline where gas can be drawn off for in-state distribution and capacity expansion of the project after it is built to handle additional gas production.
In a related action, the state released its memorandum of understanding (MOU) with TransCanada defining the company’s role in the midstream portion of the project — the gas transmission lines for the Prudhoe Bay and Point Thomson fields on the North Slope, the treatment plant that would remove carbon dioxide and other impurities from the gas stream, and the 800-mile gas pipeline itself.
Under the agreement, TransCanada would fund the state’s share of the pipeline cost and give the state an option to purchase up to 40 percent of the midstream portion before the project moves to its FEED phase. The option would expire no later than Dec. 31, 2015.
To read the Alaska LNG HOA and MOU in full, visit www.dor.alaska.gov or for more information, call (907) 465-2300.
