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. 

2013 Alaska Gas Heroes and Zeros

Heroes

(1)    Great Bear Petroleum.  These guys took a fresh look at Alaska’s petroleum resources, invested in their ideas and completed their objectives.  New gas and new oil from Alaskan shale deposits will fill the oil and gas pipelines in the future.  Great job – best wishes for continued success.

(2)    Everyone working at Point Thomson.  Oil and gas from Point Thomson will fill the pipeline(s).  All the hard work at Point Thomson will pay off in the future.

(3)    ExxonMobil & The State of Alaska – Nice job on the Point Thomson settlement.

(4)    Governor Parnell – Ramped up his game in 2012, meeting with North Slope Producers CEOs - Bob Dudley of BP, Jim Mulva of ConocoPhillips and Rex Tillerson of Exxon Mobil.  The Point Thomson settlement cleared the deck and in March 2012 the producers announced that they had aligned. He also hit the road and started talking to LNG customers.

(5)    Pedro van Meurs – Keep on sticking to the math and providing reality checks.

(6)    LNG Buyers – The Alaska Gas project is a nonstarter without LNG Buyers and this year we started seeing Japanese and Korean LNG Buyers enter the picture.  With a bit of luck the buyers will become equity partners and help move the project forward.

(7)    Cheniere Energy & Sasol.  Cheniere is moving forward with a lower 48 LNG export project and Sasol is moving forward with a lower 48 gas-to-liquids (GTL) project.  These types of projects will sponge up lower 48 shale gas, and boost gas prices.  Projects like these lead the way and Alaskans should take note and understand the parameters of real world natural gas success stories (here’s a hint – fiscal certainty).
8)  Combined Cycle Power Plants.  One by one high efficiency combined cycle power plants are coming on line.  These plants will replace aging coal plants over the next decade and consume lots of lower 48 natural gas, which will help build natural gas prices back up to a reasonable level.  Anything the builds lower 48 gas price support helps the Alaska gasline project.  Congrats to TVA for bring the John Sevier Combined Cycle plant online ahead of schedule and below cost.

Zeros

(1)    Matt Damon.  Shale gas hater Damon received funding for his anti-shale gas movie from the United ArabEmirates.  The public discourse about lower 48 shale gas ultimately impacts the price of gas, jobs and the future of gas exports from Alaska.  Bad shale gas law could choke Alaskan shale gas development. The American electorate is about as uninformed, uneducated and mathematically impaired as is possible.  It’s sad to see the simpletons led astray by one of our own funded by those who will profit from our poverty. (Ask me how I really feel!).

(2)    The 2012 presidential campaign.  There was no real discussion of the economic benefits of domestic energy development – a real missed opportunity.  Good policies now could help Alaska in the future. In 2008 I looked forward to 2012, now I’m almost certain that we are in the first years of the idiocracy.

(3)    I could name some other maladroit zeros closer to home, mainly for inaction, but for the time being I’m hopeful that project alignment, real customers and forward momentum will pull them along.

 Good luck in the new year, and work safely.

LNG Customer Meets with Governor Parnell

We need more stories like these - KOGAS CEO meets with Governor Sean Parnell (LINK).

Alaska Governor Sean Parnell and Mr. Kangsoo Choo, the Chief Executive Officer and President of Korea Gas Corp (KOGAS)

From CEO  Mr. Kangsoo Choo KOGAS website :

Expansion of participation in overseas network projects
We are assertively expanding participation in overseas network project in joint-venture with private sector. On the foundation of design/construction/operational technology and specialized manpower for production and supply facility, which are the core capacities of KOGAS, we will nurture KOGAS to become reputable gas major in the world by not only expanding construction and operation of overseas LNG terminal, LNG liquefaction plant and pipeline network but also by playing the role of bridgehead for advancement of domestic enterprises into overseas market..

Sounds like an equity partner for the LNG plant?

KOGAS is also a take-or-pay buyer of the Cheniere Energy Sabine Pass LNG project.  So far the Cheniere business plan for the Sabine Pass LNG plant seems to be working, i.e. long term take or pay contracts to pre-sale the LNG product.

 More on the same story from LNG WORLD (LINK)

Other tidbits -

Canadian competition: Petronas working on BC LNG (LINK)

Washington Post article on the market for US LNG (LINK)

ExxonMobil Energy outlook (LINK)

AGPA's LNG export application response to DOE

APGA's response can be found on DOE's website under Docket No. 12-75-LNG.

Items of note - Good summary of Korean and Japanese interest in Alaska LNG including copies of letters of intent.

Lots of other good background data and history.

Alaska Natural Gas Pipeline Act Amended

Read it HERE

Resource Development Presentations

No real news to report (again). No evidence of a sense of urgency.  All the projects are years out from project approval as all the players creep forward.

Link to presentations from the Resource Development Council.

Presentations worth reading:

• Oil & Gas: Kara Moriarty, Executive Director, Alaska Oil and Gas Association

• Alaska Gas Pipeline Project Tony Palmer, Vice President, Alaska Development, TransCanada

• ASAP

• Stan Foo, President and General Manager, Donlin Gold LLC

Vladivostok LNG or Alaska LNG - You're doing it Wrong

Vladivostok Gas Line

Alaskans have again proven they are less nimble in the marketplace and less capable than than other stranded natural gas owners.  Gazprom has announced their plans to build a 2000 mile long gas pipeline (over twice the length of the proposed North Slope to Valdez gas line) to feed a planned LNG plant in Vladivostok.  The LNG plant capacity will be between 10 and 20 mmtpa compared to 25 mmtpa for the Alaska LNG project.  The "all in" cost for field development, pipeline and LNG plant is $44 Billion.

The field development cost is $13.9 Billion and the pipeline cost is $24.8 Billion leaving $5.3 Billion to build the LNG Plant plant.   Assuming a capacity range of 12.5 to 15.0 mmtpa the Gazprom investment equals $2.93 to $3.52 Billion per mmtpa of LNG capacity compared to $2.00 to $2.56 Billion per mmtpa of LNG capacity for Alaskan LNG.

The Gazprom LNG plant cost may be understated, but there is no good reason for Gazprom to bring LNG to market for less cost than the Alaskan project.

The clear message: Alaska LNG - You're doing it Wrong.  Alaskan gas is developed, the distances are less. The customers are the same.  The steel, the talent, the jobs are headed out for projects in all locations outside of Alaska.

Good Luck Gazprom - your investment is safe as long as Alaskans keep kicking the can down the road on the Alaska LNG project.

Alaskans need to learn from this, pick apart the numbers and figure out how to get in the game before the game is over.

Here's the winning formula: Fiscal Certainty + Customer Equity Participation - Taxation Gluttony - Sound Bite Populism = Alaska LNG success.