Alaska’s sputtering and stalling natural gas pipeline project appears to roaring forward again no matter what the media might be reporting.
Just weeks after Alaska Gov. Bill Walker told the Alaska Resource Development Council that he thought the $45 billion to $65 billion project “doubtful,” the governor’s natural-gas czar has suggested to the Chinese the project is on the way to the start of construction in 2019.
Xinhua, the official press agency for the People’s Republic of China, on Sunday reported that Keith Meyer, the president of the state-owned Alaska Gasline Development Corporation, “dismissed a recent local Alaskan newspaper report which quoted Governor Walker as saying that Alaska will not put more money into promoting the LNG project until firm commitments are made by customers.”
Xinhua writers Yang Shilong and Zhou Xiaozheng went on to quote Meyer – Walker’s half-million dollar LNG promoter – saying “the project is full steam ahead. The governor indicated we are expecting market agreements before the end of next year before asking for more money from the state. However, we fully expect to have customer commitments and also will be engaging strategic partners.
“The project will keep moving without question. Unfortunately, the Alaskan press misinterpreted the governor, which is quite common here in Alaska.”
Blame the media
Walker’s comments before the RDC were videotaped. His specific statements on the LNG project – which entails a pipeline from the North Slope to Cook Inlet and a plant on the Kenai Peninsula to convert the gas to a liquid for shipment to Pacific Rim nations – came in response to a question at the end of a presentation on the state economy.
At 25 minutes, 25 seconds into this videotape, Walker is asked “what’s the next steps in the LNG project,” given the high costs?
“I’ve long felt it must be a market-driven project,” the governor answered. “And it can’t be a state project. You can’t build it and they’ll come…it takes a market.”
He went on to say the markets have been “very, very positive,” though the state has no firm commitments for gas, and then added this:
“But do we continue on? I can’t say that here. Boy there’d have to be a really strong commitment.”
Walker then suggested the state should use the rest of the funding the Legislature allocated for gas pipeline planning, but said “I don’t allow myself to be optimistic anymore. I’m hopeful. Ah, and I am hopeful. But can we continue on after this funding? I’m doubtful.”
He went on to suggest the state needed to look at new ways to “monetize that gas. There’s great value. I look at the carbon fiber. Opportunities are changing. Ah, industry around the world, as far as they’re now making airplanes and cars out of the carbon fiber….We have all the ingredients in Alaska to begin inviting carbon manufacturing business, very labor intensive. And so, that doesn’t mean we stop looking at ways of monetizing that gas.”
He also suggested taking LNG “off the slope directly” on a “seasonal basis. That’s certainly is not out of the realm. You know, one of the reasons that I hoped this happens, is that for the mining, the mining industry.”
Australian natural gas developments, Walker said, were driven by the mining industry’s demand for cheap energy. He suggested Alaska gas development could be a similar asset to Alaska’s mining industry.
Walker generally downplayed the gasline – long his personal obsession – in favor of exploring “more affordable” options. And his last comment was this:
“Let’s find out if there’s a customer. If there’s a customer that’s going to step up, take a long-term contract which would underpin the long-term financing, then there will be a project. If there is not, then there won’t be a project.”
The likelihood for finding such a customer looks grim. There is at the moment a glut in the gas market. It is such that India earlier this month managed to renegotiate a 20-year contract with ExxonMobil to get a lower rate.
“ExxonMobil slashes LNG price to India in bad omen for producers” is how Reuters headlined that story.
In a statement attributed to industry analysts, the story said that “long-term contracts are rarely revised in the LNG market, and for a big producer to cave in shows how supply from new plants in Australia and the United States over the past two years has transformed the market.”
Despite the market difficulties, Meyer appeared to be not only pitching a “full-steam ahead” gas line to the Chinese, but claiming one is nearing the start of construction.
“According to the AGDC timetable, FEED (front end engineering and design) work could begin in 2018 with construction kicking off in 2019,” Xinhau reported.
Larry Persily, the former federal coordinator for the Alaska Gas Transportation Projects and now a natural-gas adviser to the Kenai Peninsula Borough, called a 2019 construction date “as close to non-existent as is mathematically possible.”
Persily could envision no scenario in which the state could get the necessary permitting and contracting done by then. And he couldn’t imagine Chinese officials believing such a pitch and signing any sort of “long-term contract” that would “underpin financing” as Walker suggested is necessary.
“There are so many unknowns and so many risks,” Persily said. “The governor was realistic in that (RDC) presentation.”
Xinhau clearly got a different view from Meyer at a meeting in Anchorage, given its report that:
‘There will be ‘a very good marriage’ and ‘a very beautiful fit’ between Alaska and China through this project, stated Meyer.”
Meyer and the governor are headed to China next week. Meyer offered a rosy outlook for planned meetings with Chinese officials.
“We have put forth a very good proposal for China that can provide long-term, reliable and secure natural gas supply for generations,” he told Xinhau. “We have also been in discussions with Chinese companies about cooperation in engineering and construction of the project.”
“Asked if the ‘Buy American, Hire American’ policy, set out by the federal government under U.S. President Donald Trump, would affect Chinese companies’ participation in the project, Meyer responded: ‘We do not see that as being a barrier,'” Xinhau’s reporters added, again quoting Meyer.
“‘It’s an issue that we will address, but we think that the benefits to both sides through this project significantly outweigh any issues we have to address.”