Sunday, January 16, 2011

Another LNG Myth Busted

Some argue that an LNG terminal at Valdez can not compete with tidewater LNG projects. The conventional wisdom holds that tidewater LNG projects don't have to bear the cost of a long pipeline to feed the LNG plant. Is it possible that the low hanging fruit of tidewater LNG sites have been exploited and that now it's time to move inland gas to the coast for liquefaction?

This week the Gladstone LNG project announced that they have sanctioned the $16Billion 7.8mtpa LNG project. The project includes a 420 km (260 mile) gas pipeline.

This scope compares very closely to a Valdez LNG project option. A Y-line originating in Delta Junction would run about 270 miles to Valdez. 7.8mtpa LNG requires about 1.0 BCFD of treated natural gas. The AGIA findings considered a 2.0 BCFD LNG plant (LINK).

A pipeline feeding a Valdez LNG terminal would conceivably include a lateral at Glennallen for instate gas customers.

Of course the two projects are not an exact apples-to-apples comparison. An Alaska LNG option would have to tack on transportation charges to move gas from the North Slope to Delta Junction, and the pipeline route is more challenging in Alaska (Isabel Pass 3420', Thompson Pass 2812', subsurface frost and the Denali Fault). These challenges would tack on cost to the $16Billion budget.

The Gladstone Project scope includes upstream development cost (drilling wells, small pipelines, gas treatment etc.). Most of the upstream Alaska gas development has already been accomplished and the treatment cost of Alaska gas would be rolled into the transportation cost. It's possible that the Gladstone upstream development cost would offset the cost of Alaska specific challenges making the comparison more valid.


1) The Gladstone project bust the myth of tidewater only LNG plants.
2) If Gladstone can do it - so can Alaska.
3) A Y-line from Delta Junction to Valdez supports instate gas line options.

1 comment:

Brett Chandler said...

I think you make a great point here that, yes, LNG projects will need to range further afield for gas, and that this won't automatically disqualify them.

I do think, though, that the challenges of building a line from the North Slope to Valdez will add enough cost to this particular project that it is enough to keep it out of reach for the foreseeable future.