Data Dump and Walker Talk

This week the Alaska LNG project submitted a series of draft environmental and socioeconomic reports to the Federal Energy Regulatory Commission (FERC).  FERC is responsible for conducting the environmental review of the project.

You can find the files at the FERC elibrary site (FERC LINK) and search docket number PF14-21:

 

I'm still downloading and sorting through the documents - so far I don't see anything shocking or new but I'll post any snippets of interest.

Other project news of interest: Gov. Bill Walker  and his team are in New York explaining how they will manage through the current dip in oil revenues. (LINK to Alaska Journal of Commerce).  Whatever misgivings Gov. Walker may have about the project it is now his job to promote the project and represent the project as a source of future revenue.  We should all wish him good luck on his mission to protect the State's bond ratings.  Those ratings play a huge role in the cost of capital to build the project.  At today's low interest rates no one talks much about financing the project, but stay tuned - the day will come when interest rates matter a lot and the date of first revenue matters a lot. 

Speaking of Gov. Walker's misgivings, this week the Governor spoke to lawmakers and indicated in a conditional sort of way that he would drop his Point Thomson lawsuit  (Alaska Dispatch Link) and quote from Alaska Dispatch story: 

Walker said he will move to dismiss his lawsuit after introducing legislation Friday intended to address his concerns.

We'll see what he expects to get out of this legislation but the story in Juneau should flange up with the story in New York. (LINK TO GOV. WALKERS COMMENTS) 

Finally here's a link to an editorial from my favorite Okie Boone Pickens (FORBES LINK) "To Kill A Pipeline...Or Two: The Sad Reality Of Obama's Energy Thinking"  Boone may be an Okie but understands that Obama's Alaska wilderness plans can will kill Alaska oil.  It's off topic for this Alaska LNG project blog, but what's bad for TAPs is bad for LNG too. 

Dream Killer?

I guess we're all waiting for the new governor to show some sign that the Alaska LNG project is still on track.  Early indications are not good:

Amanda Coyne Link

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

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.

Northern Pipelines - On Hold

Low gas prices can't support Arctic gas pipelines:

First the Mackenzie Pipeline (Calgary Herald link) and quote:

CALGARY - Partners in the proposed Mackenzie Valley pipeline have put the $16.2-billion project on hold, slashing budgets and eliminating staff in response to continued poor price outlooks and lack of commercial support.
Imperial Oil, the lead producer in the project with a 34 per cent interest, will close offices in Norman Wells and Fort Simpson, Northwest Territories, this year, and has reduced the size of its office in Inuvik, N.W.T., spokesman Jon Harding said Thursday.
Cheap shale gas that pulled down prices, and cost escalations played into the partners' decision to cut capital on the pipeline project, he said

Back in Alaska pipeline company TransCanada has asked permission to curtail work on the eastern part of the Alaska Gas Pipeline (LINK) and quote:

TransCanada has asked the commissioners of Natural Resources and Revenue to allow it to "curtail" its work on a line that would run from Alaska's North Slope into Alberta, Canada, to focus on a liquefied natural gas project, said Tony Palmer, the company's vice president for major projects development. TransCanada's piece of that project would be the pipeline.

So now there is one project with two probable phases. Alaska LNG pipeline Phase 1 (condensate to TAPS and gas Prudhoe Bay) then Phase 2 (Gas to tidewater + LNG plant).  Lots of permutations and iterations along the way, but many options are now off the table.  Expect LNG for Japan, Korea and China in about a decade.

Reaction to Point Thomson Settlement

Maybe it's a case of what was said doesn't equal what people heard.  Fairbanks News Miner columnist Dermot Cole heard the part about no commitments (LINK).  The Anchorage Daily News heard (correctly) that Alaska has a deal to develop Point Thomson Gas (LINK) . The Wall Street Journal heard that "Alaska, Gas Firms Clear Way For Pipeline" And many media outletS proclaimed that Alaska and Exxon have agreed to build an LNG plant "Exxon seals deal with Alaska to develop $26b LNG plant".

If you want to know that facts I suggest you look at the documents on the Alaska DNR website (LINK).

What you will find is that one of three alternative or combinations of alternatives will play out over time:

Alternative A - Major Gas Sale : Gas to a pipeline and liquids to TAPS.  The clock is ticking to get this alternative sanctioned by 2016.  The window closes in 2019 when the producers must choose Alternative B or Alternative C.

Alternative B: Increase cycling and produce more liquids for TAPS.  Producers must do this or start losing leases.

Alternative C: Gas to Prudhoe Bay, Condensate to TAPS.   The gas flow to TAPS "Significantly increases TAPS throughput" This alternative also provides gas for in-state use.

None of these options involve a guarantee from the producers. The stated goal of the agreement is "A primary goal of this settlement is to incentivize commercialization of North Slope gas/Major Gas Sale (MGS)"

Looking at these options you can see it's a bit over the top to claim a LNG plant is in the works anytime soon. Possible - maybe, probable no. On the other hand the State and the Producers have covered all the bases, and they have done so in away that allows development of Point Thomson in a way that can boost Prudhoe Bay production in the short term and develop a gas export solution later (i.e. Alternative C first followed by Alternative A).  Alternative B looks like the worst case scenario unless you count Alternative "D" Point Thomson abandoned.

Those are the facts, but what about perceptions?  The markets are focused on the potential of Alaskan LNG entering the global mix.  Alaska's competitors will need to pencil that volume into the mix.  Alaska's potential customers can now step up and start negotiating deals.

Any of these outcomes equal revenue and jobs - Good things for Alaska.

Point Thomsom Settlement Agreement

The full text of the Settlement Agreement is at the DNR website (LINK).  Notice the EOR role of Point Thomson gas.  That seems to be the one of the sure things of the agreement.   EOR helps fill TAPS which is always a good thing.  The agreement also leads to commercialization of gas for sale or a large scale cycling project - either way Point Thomson starts cranking out revenue.  I'm still reading the whole thing, but so far it looks like Alaska is on the road to some large projects.

Here are some key parts:


1.6 This Agreement sets forth the WIOs’ commitment to produce natural gas condensate liquids (“condensate”) from the Point Thomson Reservoir for delivery into theTransAlaska Pipeline System (“TAPS”). The WIOs have committed to construct anInitial Production System (“IPS”) which is to be completed by the end of the 2015-2016 winter season. The IPS facility is being designed to produce and re-inject (cycle) 200 million cubic feet per day of gas and to produce approximately 10,000 barrels per day of condensate. In addition, a liquid hydrocarbon pipeline is being designed that can transport approximately 70,000 barrels per day from Point Thomson to an existing pipeline interconnection at the Badami field, which will provide for final delivery of Point Thomson liquid hydrocarbons into TAPS. Operation and production from the IPS will provide data and information to assist in evaluation of additional development plans, including potential increased gas and condensate production from Point Thomson, and plans for the delivery of Point Thomson gas into a Major Gas Sale pipeline project.

1.7 In parallel with the work on the IPS, Parties and/or their affiliates to this Agreement will, upon execution of this Agreement, undertake work for commercialization of North Slope gas. This work will build on ongoing gas commercialization efforts. If a Major Gas Sale is Sanctioned prior to year-end 2016, the WIOs will begin work on a Point Thomson project associated with that Major Gas Sale. However, if a Major Gas Sale has not been Sanctioned by June of 2016, the WIOs have committed to begin engineering of a Point Thomson Expansion Project. An expanded cycling project would result in additional condensate production, totaling approximately 20,000 to 30,000 barrels per day into TAPS, depending on the level of expansion. Alternatively, a project to deliver Point Thomson gas to Prudhoe Bay for injection would significantly increase the rate of condensate production at Point Thomson, serve as a pre-investment for a Major Gas Sale project, and essentially complete installation of the Point Thomson wells and facilities required for a Major Gas Sale. In addition, this option would materially increase production at Prudhoe Bay, and result in enhanced recovery at Prudhoe Bay.

1.8 The Agreement further establishes terms and conditions to facilitate development and provide benefits to the State of Alaska. Certain acreage within the Point Thomson Unit is secured when specified work activities are completed (e.g., the IPS is completed and producing) and key commitments or decisions are made (e.g., a Major Gas Sale is Sanctioned or WIOs Commit to a Point Thomson gas development / Prudhoe Bay enhanced oil recovery project or an IPS gas cycling expansion project). Likewise, the Agreement provides for the automatic release of certain acreage to the State if the IPS is not completed or if certain key commitments or decisions are not made (e.g., a Major Gas Sale is not Sanctioned or WIOs do not Commit to a Point Thomson gas development / Prudhoe Bay enhanced oil recovery project or an IPS gas cycling
expansion project). Depending upon the work activities that occur, the Point Thomson Unit will remain in effect or may terminate.

2.13 “Initial Production System” or “IPS” means the gas cycling facilities designed with capacity to produce and re-inject (cycle) 200 million cubic feet of gas per day utilizing reciprocal compression and with the objective of a minimum of 10,000 barrels per day of condensate for delivery into the TransAlaska Pipeline System (“TAPS”).

2.16 “Major Gas Sale” or “MGS” means a large-scale pipeline project having a design throughput of more than 500 million cubic feet of gas per day that results in delivery of gas off the North Slope of Alaska.

2.21 “Point Thomson Gas Development / Prudhoe Bay Enhanced Recovery Project” means a project to deliver Point Thomson gas to Prudhoe Bay for injection that would significantly increase the rate of condensate production at Point Thomson into TAPS, serve as a pre-investment for a Major Gas Sale, essentially complete installation of the Point Thomson wells and facilities required for a Major Gas Sale, and allow for continued efforts towards, and positions Point Thomson gas for, a Major Gas Sale. In addition, this project would materially increase oil production at Prudhoe Bay into TAPS and result in substantial enhanced recovery at Prudhoe Bay. A Point Thomson Gas Development / Prudhoe Bay Enhanced Recovery Project would result in
production and recovery of liquids from Point Thomson and Prudhoe Bay that would be greater than production and recovery of liquids from Point Thomson from an IPS Gas Cycling Expansion Project of a minimum of an additional 20,000 barrels per day. Before Project Start-up required approvals from the Alaska Oil and Gas Conservation Commission must be obtained.
The project would consist of:
(i) a newly constructed gas pipeline from Point Thomson to Prudhoe Bay with the capacity to transport significant volumes of Point Thomson gas in an amount that would position Point Thomson gas for a Major Gas Sale, for injection for:
(a) use in repressuring, stimulation of production, and increasing ultimate
recovery of Prudhoe Bay oil; and (b) for ultimate availability for a Major Gas Sale; and
(ii) additional wells and facilities at Point Thomson to produce and process significant condensate production for delivery into TAPS through existing liquid hydrocarbon pipelines and pipelines constructed as part of the IPS Project. These facilities would also be used for a Major Gas Sale

New Focus On LNG "We Have Aligned"

Nothing to bank on but it sounds like the gas line project is morphing into an All Alaska line that will feed a tidewater LNG plant.  The first element of the plan is the Point Thomson settlement (LINK), and quote:

(Reuters) - The U.S. state of Alaska has reached a settlement with Exxon Mobil Corp and its partners to develop a huge, long-fallow oil and gas field, possibly paving the way for a $26 billion pipeline and an export plant for liquefied natural gas.
The settlement, which resolves a long-running lease dispute over the Point Thomson field about 60 miles (95 km) east of Prudhoe Bay, could allow for exports of liquefied natural gas via tanker to Asia and may boost Alaskan oil production after decades of decline.
In exchange for continued lease control, operator Exxon and partners BP and ConocoPhillips have agreed to build a pipeline from the field to deliver 70,000 barrels per day of liquids into the Trans Alaska Pipeline System.
The settlement also calls for the companies to produce 10,000 barrels per day of natural-gas condensates by the winter of 2015-16, state officials said.

That's a lot of condensate, I'm not sure where that flow will go but I'm looking forward to the project awards and jobs that will flow from this settlement.

The second element of this good news story is the possibility of an LNG export terminal (CEOs Letter to Gov. Sean Parnell). Quote from the letter:

Serious discussions between our  companies have taken place over  the past several months,
along wi th the Alaska Pipeline Project (APP) parties who are supporting the AGIA License.  We have aligned on a structured, stewardable and transparent approach wi th the aim to
commercialize Nor th Slope natural gas resources within an AGIA framework.  As a result of  the rapidly evolving global market, large-scale liquefied natural gas (LNG) exports f rom southcentral Alaska will be assessed as an alternative to gas line exports through Alberta.  In addition to broadening market access, a south-central Alaska LNG approach could more closely align wi th in-state energy demand and needs.  We are now working together on the gas commercialization project concept selection, which would include an associated timeline and an assessment of  major  project  components including in-state pipeline routes and capacities, global LNG trends, and LNG tidewater  site locations, among others. 

This isn't the slam dunk project sanction announcement, but it's close to the Kumbaya moment many of us have looked for.  The language is parsed, but you would like to think that the CEOs of the North Slope producers are at least 80% certain of a project before they signed up to "assess" an Alaskan LNG project.

The current trend in lower 48 shale gas prices lead me to believe that Alaskan LNG export is the last hope of developing Alaska's natural gas.  Full development of Point Thomson makes little sense without a viable outlet for the gas.

One certain take away is that all three producers are on Team AGIA now with the "We have aligned" statement.  Nice job Governor, don't stop now.

Additional LINKS

(Washington Post/Bloomberg Link)
(Gov. Parnell Website Press Release - Pt. Thomson Resolved, Aligment on Gasline)
(Alaska DNR Point Thomson website)

Breakthrough around the corner?

Maybe, possibly, who knows.  I don't tend to get too excited anymore, but this story made the DrudgeReport, has a link to a Financial Times story on the Alaska Gas Pipeline.  (See today's Drudge Report for a link that works (LINK)

Here's a quote:

According to people close to the negotiations, the three companies and state authorities hope to reach agreement next week over a long-running lease dispute at Point Thomson, a large oil and gas field on Alaska’s North Slope.

A settlement would clear the way for the companies to hasten their commercial assessment of a large gas pipeline to Alaska’s southern coast, from where LNG could be shipped to China and other Asian countries. Sean Parnell, Alaska’s governor and a champion of the project, told the Financial Times he was “cautiously optimistic” that the plan would be able to move forward.

Maybe it will play out like they say. A Point Thomson settlement would help in terms of immediate employment opportunities so fingers crossed.  Hastening the gas pipeline may be a stretch.  "Hastening commercial assessment" doesn't sound like a project anytime soon.

Three & One

Yesterday Alaska's Governor Sean Parnell met with the CEO's of ExxonMobil, BP, and ConocoPhillips to talk about commercialization of North Slope gas, boosting Alaskan oil output and Point Thomson.(LINK to Governors press release), and the agenda:

It's not a kumbaya moment yet, but I'll give the Governor and the CEOs credit  for manning up and doing the adult thing, i.e. start talking about the issues that are stalling development of oil and gas in Alaska.  This group should talk more often.  Quote from the Governor:

“I appreciate the willingness of the chief executives to come to Alaska to discuss the important topic of commercializing North Slope gas,” Governor Parnell said. “For a gas project to advance, all three companies need to be aligned behind it. This meeting is an important step, but much work remains.”

Nice work Governor, don't let up.

No Precedent Agreements

That's the word from TransCanada (LINK to slides) in a presentation to Alaska State Legislature Senate Resources Committee on August 16, 2011. Here's a chilling quote from the slides.

"APP has not been able to secure Precedent Agreements with Shippers at this time"

No shippers, no buyers, no project. Tony Palmer, TransCanada VP was unable to show proof of project viability to lawmakers in testimony to the Alaska Senate Resources committee on Tuesday (LINK). Point Thomson is identified as the major sticking point. According to TransCanada:

"Resolution of Pt. Thomson and gas fiscals are essential to commercial success"

A solution to that problem may be in the works (LINK to Alaska Dispatch). Alaska Dispatch ran the Point Thomson story on the 15th however other news outlets have been slow to grasp the significance of an agreement on Point Thomson. The Fairbanks New-Miner has a followup story with no new content (LINK).

We do know that ExxonMobil has drilled a couple of wells (PTU-15 and PTU-16) in recent times and has plans to produce condensate as early as 2014. (USACE EIS LINK). At a minimum Exxon has more data and is in a good position to negotiate with the the Department of Natural Resources. (LINK to a good description of Point Thomson).

Sometimes it seems like this project is all lawyers, politicians, and guys in nice suits. It's good to see at least one outfit (Exxon) is out there, boots on the ground, building, drilling, hiring and making tangible progress. With a little luck maybe their success will get the ball rolling.

Another bite at the apple

From Petroleum News:

Point Thomson case on ice: Judge grants state’s call for timeout as it appeals ruling to Alaska Supreme Court, Wesley Loy

A judge has ordered a temporary halt to the Point Thomson case pending the state’s appeal of a recent unfavorable ruling to the Alaska Supreme Court.

The one-page order from state Superior Court Judge Sharon Gleason of Anchorage, issued Feb. 11, came over the objections of ExxonMobil and other oil companies with a stake in the rich Point Thomson oil and gas field on Alaska’s eastern North Slope.

Fresh off a significant victory in Gleason’s court, the companies had opposed the State of Alaska’s request for a timeout in a case that’s not yet run its course.

Gleason granted the state’s motion to stay the Superior Court proceedings until the Supreme Court either rejects the state’s petition, or accepts and acts upon it.

(Court Case Info Link)

Enough already - Stick a fork in it - It's done!

Point Thomson Success

ExxonMobil Reaches Target Depth at First Point Thomson Well.

Plan the work, work the plan - What's not to love about this news? Politicians be damned. This team has a plan to develop the gas that will fill the pipeline.

From the Press Release: ExxonMobil drilled the well to a measured depth of over 16,000 feet. The shore-based rig directionally drilled under the Beaufort Sea to the targeted gas reservoir more than 1.5 miles offshore.

“This is another successful milestone for the Point Thomson project,” said Dale Pittman, ExxonMobil Alaska production manager.

ExxonMobil Senior Project Manager Lee Bruce added, “PTU-15 pushed the limits of drilling technology and demonstrated that the Point Thomson drilling plan is sound.”

The rig will be moved to the second development well at Point Thomson (PTU-16) and continue drilling. Work continues on front-end engineering and design for the initial production system.

A Turning Point?

Will Point Thomson become the turning point for State of Alaska & North Slope producers?

Perhaps - According to Govoner Sean Parnell:

"I think we are at a place where we need to resolve the Point Thomson litigation. I am working at that already. If I can resolve that litigation in Alaska's interest, I will do so." (LINK)

Rich Kruger, President of ExxonMobil Production Company had this to say:

ExxonMobil wants to see Point Thomson developed. We believe it underpins the success of the Alaska Pipeline Project. The owners’ commitment to achieving progress at Point Thomson is demonstrated by investments which have now topped $1 billion. (LINK).

I wouldn't call this a Kumbaya moment, but it's a step in the right direction. Maybe Parnell is starting to feel the heat from calls to oust ExxonMobil playa hater Tom Irwin (LINK to Halcro).

Parnell's to-do list should also include tackling the fiscal certainty. It's in Alaska's interest to explore for, produce and market oil and gas. Go for it Governor, get'er done!

Big Week For ExxonMobil

The Supreme Court could issue a decision in the Exxon Valdez case this Monday. After 19 years the case may finally be settled.

Link to Supreme Court Decisions

One thing the case proves is that Exxon will spend years litigating. A good point to keep in mind as ExxonMobil and the State of Alaska head back to court to haggle over Point Thomson.

Link to Alaska Journal Point Thomson Story

Link to the Fairbanks News Miner Point Thomson Story.

Update - The Supreme Court did not rule this week - stay tuned!