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.

New Calls to Dump AGIA

The Alaska Gasline Port Authority (AGPA) has a new press release (LINK) calling for an LNG plant at Valdez (LINK to Report).

In a nutshell the report claims that an LNG plant at Valdez is competitive with other LNG projects for supplying LNG to Asian buyers.

The report does a good job of quantifying the demand side without any actual indication of buyer interest in Alaskan LNG. At this point in time non binding expressions of interest would go the next step to show that buyers are actually interested and armed with baskets of cash. This is important because all Alaskan gas projects are empty promises until buyers step up.

Some other metrics from the report - The LNG plant is estimated to cost $1,200/ton and operate on 9.65% of the gas feed. The reports assumes that pipeline LNG gas plant owner operators will be satisfied with 8% ROE and that natural gas liquids will garner $80/bbl.

The all in cost of delivered LNG is estimated to equal $8.50/MMBTU priced at rates indexed to crude oil prices. This cost well below current and projected LNG cost.

Weak points - 8% ROE won't bank the deal. Think 14% - 15%. Without some indication of buyer or developer interest the report has the empty ring of the early days of project promotion.

Instead we're hearing the Tokyo Gas is looking to Atlantic LNG (LINK).

Recommendation: An Asian LNG buyer should cash in US treasuries and take a large equity position in securing Alaskan LNG. Let's face it who wouldn't rather own MMBTUs instead of USDs if the exchange rate is $8.50/MMBTU.

The Pitch for more Alaskan LNG

Could the All Alaska Gas Pipeline to Valdez be the option that works?

The Alaska Journal of Commerce posted an opinion article by Bert Cottle (LINK). Bert Cottle is the Chairman of the Alaska Gasline Port Authority.

Mr. Cottle's article lays out the top reasons we need to build the All Alaska gas line now.

It's true that the delivered cost of LNG is greater than pipeline gas, but the market for pipeline gas is restricted to the pipeline system. LNG can be marketed anywhere.

In addition to Mr. Cottle's reasons, let me add a few more:

1) The All Alaska option keeps control of project in American hands. I'd hate to see a gas line to the lower 48 get tangled up in the Canadian regulatory system and courts for decades like the Mackenzie Pipeline. You'll note there is no third flag in the photo at the top of this blog.

2) The All Alaska option is less expensive. Crooked bankers get billions from the Government for producing nothing but a mess. The oil industry funds our projects from revenues earned the hard way. I'd rather see a less expensive pipeline built now than wait a couple of decades for a larger project.

3) Building the All Alaska gas line to Valdez would support the future big line to the lower 48 (or tar sands). The project would complete environmental studies, build roads, treatment plants and train a workforce for work in this environment.

4) Finally - As that great philosopher Mickey Gilley said "All the girls get prettier at closing time" With Henry Hub natural gas prices below $4/MMBTU all Alaskans had better wake up and realize it's getting close to closing time for the gas pipeline. An LNG tanker steaming out of Valdez looks pretty good to me.