Saturday, December 28, 2013

Stand Off ? Game Over ?


Interesting news - Obviously the AGIA project team of TransCanada and ExxonMobil will need to agree to abandon AGIA for new undisclosed agreement and project structure.

If TransCanada and the North Slope producers assemble a new project structure will the new project include an equity position for the state? And what about the Japanese (JBIC & REI) I'd like to think customers with money to invest would have a role on the project.

There are a lot of moving parts here and the state of Alaska and the producers have spent years and millions of dollars with very little to show for their efforts.  The clock is ticking down and I see Governor Sean Parnell losing the game in the last second.

The first big loss happened on Sarah Palin's watch - The gas line was almost a reality when North American shale gas burst upon the scene.  North Slope producer ExxonMobil bet big on shale gas ($40billion) and bought XTO.  Fractional term Governor Palin's introduction of AGIA burned valuable time off the clock and the win went to gas investments elsewhere.

The full impact of shale gas was not immediately apparent and it took some years for the overland Alaska gasline to morph into an all-Alaska gasline feeding an LNG export terminal.

Along the way fate dealt Japan a cruel hand in the form of a devastating earthquake which also destroyed nuclear plants at Fukushima.  The magnitude of the Fukushima disaster resulted in the closing of all nuclear plants in Japan and a dramatic uptick in Japan's need for imported energy including LNG.

Somehow the state skillfully avoided the obvious and failed to engage with Alaska's long term LNG customer to strike a deal.

Meanwhile cheap shale gas in Texas and Louisiana prompted many Gulf of Mexico LNG import terminals to invest in LNG export projects.  Soon, the first loads of GOM LNG will hit the market.  A portion of those sales will go to Japan.  Again other projects are getting built while Alaska make no progress.

The losses keep piling up. Maybe Governor Parnell knows what he's doing but the producers have hundreds of competing projects with known variables competing for their investment dollars.  In fairness to the Governor he did win the battle of Point Thomson so I have some level of faith in his abilities.

Other opportunities exist (state equity position, and low interest customer government backed financing).  Again Alaska is avoiding the win or ignoring the clock, either way investment dollars are poised to go elsewhere.

The clock is ticking, and oh by the way interest rates are heading up. Spoiler Alert Governor Parnell - interest rates will kill the gas line for decades unless the grand bargain is reached in 2014.






Friday, December 20, 2013

Adios AGIA

Perhaps Christmas is coming early in Alaska - the State is looking at ditching the Alaska Gasline Inducement Act(AGIA).

Looks like my prediction of AGIA's future was a few years premature, LINK.

Friday, December 6, 2013

Age of Gas

I found this publication by GE interesting (Age of Gas Link).

Good data source for all things gas and LNG.

Page 31 has a good chart - it shows the cost of gas transport via pipeline and LNG ship.

Page 54 graphs the relative cost of power vs. various energy sources. Spoiler alert - Gas combined cycle is the winner.

Wednesday, November 20, 2013

New Alaska LNG Study

Alaska North Slope Royalty Study has been released (Website LINK), (Study Link)

First impressions - study hits on the major factors: Fiscal Certainty and Risk Allocation.









Saturday, October 19, 2013

LNG Map

API has produced a new online map of LNG projects.  Don't look for the Alaska LNG project - it didn't rate a pin on the map.

Lnik to API LNG map

Wednesday, October 9, 2013

Alaska LNG Port Named - Nikiski

Alaska LNG Port Named - Nikiski (LINK)

ExxonMobil Announcement LINK

I'd like to see the new pipeline route and the cost impact of this site selection.

Sunday, September 22, 2013

Buy out TransCanada

That's what former Alaska Governor Frank Murkowski says.  (JUNEAU EMPIRE LINK). Murkowski's quote:

“I think we should take TransCanada out of the equity stream for this project,” Murkowski said. “This is an equity interest, which in my opinion, belongs solely to the State of Alaska.”
TransCanada's role in the Alaska Gas Pipeline dates back to the pre-shale gas days of Sarah Palin, AGIA, and much higher gas prices:

 
Murkowski's logic is sound.   TransCanada has performed the requested task, they have done a good job, but the market place changed and their involvement in the Alaska Gas Pipeline no longer serves a need.

This chart shows the ratio of oil prices to natural gas prices over the same time range - Alaskans, heating their homes with oil are especially hard hit by this market shift:


The world has changed in other ways since Palin and AGIA. The Fukushima disaster has led Japan to shut down all their nuclear power generation.  Tensions in the Middle East have flared adding risk to buyers that rely on LNG from that region.  

Japan can become a true equity partner in the Gasline / LNG project whereas TransCanada is along for the ride and a healthy chunk of regulated monopoly profits.

There's that word - Profit, Return on Capital Employed (ROCE).  I hate to break this to you but an Alaskan Gasline / LNG project is not going to be wildly profitable. This project is all about managing risk.  The project risk can be mitigated with low interest rates (SEE JBIC RATES on page 97 of this link), managing tax rates, and controlling cost.  One cost control opportunity is to take TransCanada out of the equation.

Pipelines are regulated monopolies and they typically enjoy high returns. High rates paid to TransCanada are a cost that can be avoided or mitigated if the pipeline is built and operated by the true equity partners which include the North Slope producers, the people of Alaska and the overseas buyers.

I think Frank Murkowski is on to something here - let's see if it gains traction.









Saturday, September 14, 2013

JBIC MOU with DNR for LNG

(Reuters) - Alaska has signed an agreement with the Japan Bank for International Cooperation (JBIC) to investigate natural resource exports in a renewed sign of demand for the state's natural gas, officials said on Wednesday.

Link  MOU

Link  Press Release

Link REI LNG Project Slides 

Link More REI Slides (15-20 mmtpa concept)

Link : REI-LNG website

Liking the sound of this: "A large-volume natural gas pipeline and export facilities"




Update: Interesting context for the agreement with Japan: The last Japanese nuclear plant has been closed (LINK)

Friday, August 23, 2013

IGU LNG Report

Good report on LNG developments.  Long list of North American projects on page 36.

Here's a shocker - Alaska Gas Pipeline and LNG project are barely mentioned. (LINK). 


Saturday, August 3, 2013

Other Pipelines and Projects

The Alaska Gas Pipeline and associated LNG plant is, according to all the evidence I can gather, dead for at least another decade.  The slides presented with the ExxonMobil second quarter earning conference call still list Alaska as one of the "Upstream LNG future opportunities".  See page 17 of the presentation slide set.

The Alaska LNG project does not even rate a bullet for explanation and none of the analyst in attendance had any interest in Alaska LNG.  Here's the only mention of the Alaska LNG rpoject:
We also continue to assess other LNG opportunities in Alaska, Australia, Russia and Tanzania. A range of factors will be considered before any final investment decision is made, in particular, the fiscal and regulatory regime, market conditions, and capital costs.(Transcript Link)
They did mention that pesky concept of fiscal and regulatory regime for  the umpteenth time but I don't expect Alaska to sit up and listen, Tanzania might get in the game, but Alaska can't stop hating long enough to cut a good durable deal.  In the mean time other projects emerge or fade in response to market forces.

The Russian Shtokman project has been canceled. This project was an offshore version of the Alaska project with a combination of gas exports via pipeline and 15 MTPA of LNG.  The gas production rate was about half of the Alaska gas project size and the stated cost was about a quarter of the cost of the Alaska gas project.  The cost estimate seems light and I suspect the refined cost estimate pushed the project over the cliff of feasibility. Chalk up another victory to North American shale gas  I expect other marginal project to be cancelled as shale gas LNG moves forward.

New project of the week - $12 Billion TransCanada Energy East Project. The project involves conversion of a gas pipeline to oil and a total of 2700 miles of line across the Canada. Shipping for 900,000 BPD of the 1.1 million BPD capacity has already been contracted.
 
Nice job Canada - The project recycles an old pipeline and displaces imported oil. Jobs, Jobs Jobs - it's all about Jobs.

Saturday, July 20, 2013

Project Pulse: Flatlined


The latest Alaska Pipeline Project's Pre-Filing Status Report for 2ed Quarter 2013 is a one pager that shows less progress than the last no-progress report (LINK TO FERC ELibrary).

Here's the content of the report:
  • Open Season:  Notice was provided to the Commission on May 3, 2012 that the first binding Open Season was terminated as of that date. 
  • Public Outreach: A Stakeholder Engagement Plan was filed with the FERC on April 5, 2010. No engagement has occurred in the past quarter. 
  • Pipeline Right-of-Way and Engineering: Pipeline engineering and technology development work initiated to date has been completed and documented.
  • Gas Treatment Plant (GTP): Engineering deliverables have been archived for potential future use.
  • Environmental Planning and Permitting: No Environmental planning or permitting work has been conducted in the past quarter, although invoices for 2012 work continue to be processed.
  • Project Meetings: The project had no additional contact with federal, state, and local agencies that have regulatory approval or other interests regarding the Project in 2Q2013. 
  • Project Activity in Canada:FERC requested an update of Project activities in Canada in these activity reports. Completed remaining field program work and permit requirements with federal and territorial and provincial governments.
Aside from Bill Walker no one seems to be agitated by this de facto termination of the project. According to some observers it's not time to blow down the North Slope gas. (LINK).  If it's not time to blow down the gas why does Alaska continue to burn AGIA money?

Here's a look at the AGIA funds expended as of the January 2013 report:

 

If the Quarterly FERC report is an accurate indication of the project health why do Alaskans continue to shovel money at it?


Friday, June 21, 2013

North Slope Producer Applies for LNG Export Licence

If you think this is good news for the Alaska gas line and LNG project you would be wrong.

The 4 BCF / 30 MTPA LNG project is being developed by WCC LNG, an entity owned by  Exxon Mobil and Imperial Oil Resources. The project will be built in the Kitimat and Prince Rupert area.

There's talk of an Alaska LNG project announcement soon (no later than 30 Jun 13).  That may just be wishful thinking -The WCC application has all but one of the ingredients needed for an Alaska LNG project, i.e. it's not in Alaska.

The project will be based on Canadian shale gas resources but may ultimately recieve gas from other sources:
The LNG Terminal will access gas primarily from the WCSB. Given the  ntegrated nature of the North American gas markets and pipeline network, gas supply could also potentially come from other Canadian or North American basins over the life of the LNG Terminal.
 So maybe some day an Alaska gas line to Canada may send gas to an export terminal in Canada. By someday I mean decades from now.

This news combined with the Petronas Canada LNG project announcement leads me to believe that Canada will export LNG before North Slope gas is exported.


The cost of the WCC project is not stated and the project is not approved yet.  This non-Alaska Exxon Mobil LNG terminal may become a powerful bargaining chip in negotiations with the State of Alaska.  Alaskans won't like that and I'll bet Exxon Mobil comes out the winner no matter which project goes forward.

The good news for Alaska, is that the Canadian upstream is not as developed as the North Slope upstream which means the unit cost of West Coast Canadian LNG may be within 10% of the cost of North Slope LNG exported from South Central Alaska - that 10% may offer room to negotiate.






Friday, May 31, 2013

Sunday, May 26, 2013

Canadian and L48 LNG Project Progress

Pacific Northwest LNG is making progress on their LNG export project planned for Prince Rupert B.C.  From their press release:

 Pacific NorthWest LNG Ltd. has awarded Front-End Engineering and Design (“FEED”) contracts for its proposed liquefied natural gas (“LNG”) facility in British Columbia to three international engineering contractors - Bechtel, KBR/JGC joint venture, and Technip/Samsung Engineering/China Huanqiu joint venture.
The project timeline currently aims for an investment decision in 2014 and project completion in 2018.

Also - Real progress on L48 LNG projects : LINK

Sabine Pass Liquefaction Project ( In Construction) 2.2 BCFD equivalent with room to expand, customers and financing locked in.

Feeeport LNG (clearing permitting hurdles)  2.0 BCFD equivalent, customers signed on, construction planned to start later this year.

Once again Alaska is getting left behind.  Every day and every time I hear about another project announcement I grow a little closer to the "never going to happen" point of view for the Alaskan LNG project.

Friday, May 17, 2013

Alaska/Japan LNG Opportunity Resources Energy, Inc. - A customer's view.

At long last an Alaska LNG customer's concept for a project.  (LINK)

At first read I noted something you rarely see in Alaska Gas Pipeline or Alaska LNG project proposals - as sense of urgency.

They also mention Royalty in Kind (RIK).  This is starting to sound like stakeholders like the State and Customers may bring resources to the project and start moving forward.

Global Warming Disproved!


Global Warming disproved!  Second latest ice out date in the history of the Nenana Ice Classic, so far. It could go the distance.

 


Tuesday, April 30, 2013

RFP 2013-1000-1881 North Slope Royalty Gas Study

Another study is in the works. LINK

Screenshots of the good bits:





I'm not sure how to interpret this.  It could mean the state or other parties want an equity share in the project.  It will give the State another study to point at.   As time passes I'm beginning to join the "never gonna happen" camp.


Monday, April 15, 2013

Really?

Seriously, this is a "project progress report"?

LINK


The report reads like a project close out report - all done.

Saturday, April 6, 2013

Know Your Competition

The progress and possibilities of American LNG projects have been neatly summarized in a competitive bracket format (Article Link), (Bracket PDF Link).

There are no Western Canadian projects on the bracket, but Alaska's Gas Pipeline / LNG project is listed as a wildcard.

It's a good summary and informative in terms of the projects that are competing for LNG investment dollars.

Spoiler alert - Alaska may not be winning!

Saturday, March 30, 2013

No Up Side


"Alaska's fiscal regime is broken" According to Dan Seckers, a tax expert with Exxon Mobil.  He went on to characterize the ACES tax rules as having "no upside" due to progressivity.

From 360north.org:

Sunday, February 24, 2013

LNG Project Presentations

The project concept letter from last week was brief and left readers wanting more detail.  This week Mr. Steve Butt Senior Project, Manager Alaska LNG Concept Selection provided a presentation "Progress Exxon/Mobil ConocoPhillips BP &, TransCanada Have Made to Advance North Slope, Natural Gas Development"

LINKS

Video

PDF

Thanks to Matt Buxton, Government Reporter, Fairbanks Daily News-Miner  for providing the links.

I think you'll find the presentation is more informative than the letter.



 

Saturday, February 16, 2013

Alaska Gas Pipeline Concept Letter

The North Slope producers and TransCanada have released a letter to Alaska Governor Sean Parnell (LINK to Letter). According to the letter the group has completed the concept selection phase.



Nothing earth shattering about the concept.  No indication of any level of commitment. Note that the letter is not signed by CEOs.  It does feel like we are getting nowhere faster these days.

 

Thursday, February 14, 2013

Northern Alliance

I didn’t see this coming. Looks like a crafty deal. Possible new source of capital for the Alaska gas line?  Coordinated development of the Arctic. Free market at work - gotta love it




Exxon-Mobil Rosneft Arctic Deal LINK

Saturday, February 2, 2013

ASAP - Bigger Pipe Dryer Gas

The Alaska Stand Alone Pipeline (ASAP) annual plan is out (LINK).

The 500 MCFD pipeline has grown from a "wet" gas 24" diameter (at 2500 psi) pipeline to a dry or lean gas 36" diameter (at 1480 psi) pipeline.

The change reflects a drop in value of natural gas liquids (NGL) due to - you guessed it - the lower 48 shale gas miracle. No NGLs means no propane for rural Alaska.

The project cost increased slightly to 7.7 B$ from 7.5 B$  (+/-30%)

The report inindicates that RFQs (Request for Qualifications) and RFPs (Request for Proposals) have been sent to qualified firms and that negotiations will start in January 2013.

The project lacks and agreement with and LNG anchor tenant.  Summary shown below (click to enlarge)




As projects go I suppose this is OK news unless you want a job soon or propane in the future. I'm always looking for the big impact announcements like "Notice to Proceed". Maybe next year....(the official Alaska Gas Pipeline blog motto).


Sunday, January 13, 2013

2013 - Alaska off to a Slow Start, Again

Normally I look forward to reading a report titled "Alaska Pipeline Project's Pre-Filing Status Report 4th Quarter 2012 under PF09-11" The report documents that nothing remotely akin to progress is going on in Alaska..

The positive gas project news report of the week came from the Canadians, From Bloomberg:

Progress Energy Canada, purchased by Petronas last month for C$5.2 billion, selected Calgary-based TransCanada to build the Prince Rupert pipeline, which will be capable of expansion to 3.6 billion cubic feet a day, according to today’s statement. The project is TransCanada’s second proposed pipeline to an LNG export terminal on the West Coast, following its previously announced Coastal GasLink pipeline.