Alaska Pushes Forward to Bring North Slope Gas to Market

The Alaska Natural Gas Development Authority (ANGDA), in response to a challenge from newly inaugurated Governor Sarah Palin, has released a comprehensive Conceptual Gas Line Proposal for the purpose of bring North Slope Gas to market. The proposal is clearly good news for Alaskans and potentially could be a lucrative deal for those producers (lease holders) who step up to the plate to participate. But, the clock is finally running in Alaska, where residents have waited 35 years to liberate what ANGDA CEO Harold Heinze calls “stranded gas.”

Frustrated by years of indecision by potential partners, the state has set upon a course which Heinze says will be determined within 18 months; possibly as quickly as January of 2008. The ANGDA proposal is a simple one: bring the gas down to local markets through an Alaskan pipeline and allow for the possibility of exports to the lower 48 and / or Pacific Rim destinations. The plan requires one producing partner as opposed to the myriad of parties involved with any number of other proposals which are on the table and have languished for years. On Wednesday, Heinze made no bones about it: “We will be taking care of Alaska first. Other participants who could enhance this minimalist plan are welcome to come on board.”

Heinze also told MarEx on Wednesday that Governor Palin - who clearly was not the favorite candidate of the oil lobby in the November elections - nevertheless made it one of her first priorities to meet with a wide range of (12) players who could help Alaska bring the gas to market. That having been said, she also “challenged ANGDA to develop an Alaskan based project to connect North Slope gas to market.” The Alaska Gas Market System Project Proposal is the first manifestation of that challenge.

Alaska’s ambitious plan to obviate the need for the uncertain Canadian participation in their energy plans is being received well in the 49th state. Other virtues of the plan include the focus of “Alaska first,” as well as the establishment of a timeline which could, in the end, hasten the involvement of those who had previously been dragging their feet. Companies mentioned in MarEx conversations with ANGDA officials included Shell, the BG Group, Mitsubishi, Sempra and a host of others. But Alaska, says Heinze, will not wait forever. The very realistic six-year year span of the project conceptual schedule includes provisions for project description, regulatory approvals and financing, procurement, logistics, right-of-way issues and the construction period.

The preamble of the ANGDA proposal says “striking a deal that has unanimous (Exxon, BP and Conoco Phillips) support is problematic in itself, and may not be in the best interest of the state.” At the ballot box, the November elections brought into power a governor who was not the first choice of the energy producers and lease holders in Alaska. Those elections also saw the defeat of the reserve gas tax referendum, much to the delight of those same energy companies who spent heavily to defeat it. Hence, the New Year brought a mixed bag of news for oil interests in Alaska.

But, the new ANGDA proposal clearly opens the door for participation from others which could ultimately produce a much bigger project. Heinze says that Alaska welcomes this development, if it comes. If not, the $5 billion project will go forward, ending 35 years of frustration and at the same time, serving local Alaskan interests. What the energy companies will now do in response is still unclear. In contrast, Alaska’s intentions are now crystal clear and those plans no longer include waiting around for Canada and the energy lobby to make up their minds.

Managing Editor Joseph Keefe can be reached at jkeefe@maritime-executive.com with comments and / or questions.