AK’s got gas

pipeline blm photo

Alaska oil pipeline/U.S. Bureau of Land Management photo

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 MeyerWalker’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.

Affordable options

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.”














7 replies »

  1. “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.”

    How about all the residents of Alaska from Fairbanks to Kenai?
    How about all of the Alaskan businesses from Fairbanks to Kenai?
    How about all of the state and federal buildings from Fairbanks to Kenai?

    I guess once again, just like with the crude from the North Slope…the plan is to ship the resource away from the local struggling economy and send it to China ( a rising Communist dictatorship that does not value human rights)…

    Where was Mr. Walker educated at?

  2. This isn’t crazy as much as it is Walker’s cronies looking to cash in on the construction of this modern day Soapy Smith extortion racket. Just look who he’s got the AGDC stacked with for starters. And to think some were principals in not only the last attempted raid on the Permanent Fund – and this one too – but they were also the public face of the $14 or so million spent to keep SB 21 in the tank for Big Oil. The same bill that’s keeping the boot on this state’s solvency now. “Make Alaska Competitive”, my ass!
    Make Alaska the laughingstock of the international oil patch is more like it.

    If and when Alaska is going to get its gas to a major market for sufficient return to the state – it will be because the whole kit and kaboodle was done at Prudhoe Bay – including export in the form of LNG in icebreaking tankers, of which China has at least 1 as of a year ago, and Russia with 14 slated for use in its Yamal field, which coincidentally is substantially further north than Prudhoe. That should tell you something about the viability of icebreaking tankers right there as the ice goes out much sooner in the Chukchi and Beaufort Seas than in Russian waters in the vicinity of the Yamal Peninsula. And the old multi-year ice has diminished to a smaller and smaller footprint every year and it’s a well-established trend. The Arctic Ocean ice as an impediment to modern shipping is going into the history books.

    The object of developing North Slope gas is to return profits to the state and its people, not to fatten up the builders at the expense of the state and its future generations. This latest sideshow fails the sniff test miserably for a number of substantial reasons. And they are glaring in their magnitude. Gee, I wonder how a war with China will affect trade with China?
    Never mind, they’ll be OK because they’re currently assured a supply from Iran, Qatar, and Russia, so don’t worry about China if “we” declare war on them, and “we” would never frivolously go to war, now would “we”? But Alaska? What does that do for any contract we might have on paper? Would we get a ‘bye’ from the Pentagon for that just because we’re special and funky and live in igloos and stuff? Time will tell, right?

    When Hawker, Chenault and Parnell stabbed ANGDA (the People’s will and choice) to death and hijacked the route to Nikiski in all of its absurdity as a gas receiving and export terminal, they wrote the obituary on a meaningful, read profitable – project that involved a trans-Alaska pipeline. That the majors ever even wanted to build a gas line is a fair enough question to ask, just look how they dragged their feet for all the time that they have, and all of the other major worldwide projects they have developed worldwide in the interim. And some of those projects have gone deep in the hole, just taking Australia for one.
    There is much, much more to disclose regarding the ‘hinky’ bidness going on here, let alone the ‘rinky-dink’ aspects of it. More to come from me, but for now if you want a closer look into what’s going on in the world gas market for realz, try this on for size, from just a few weeks ago:

  3. Walker hints that he knows the LNG project is a dead end. Surprising to hear. So the prospects must truly be abysmal if Walker is actually starting to admit the obvious. But it sounds like he doesn’t have a short enough, or any leash, on Meyer. Meyer is in out of control cheerleader mode. But I can’t blame Meyer for pushing a fantasy agenda. The guy is pulling in over 500K for this phony gig. I’m sure he doesn’t want this windfall to end for him. So I’m guessing these two will run this gravy trail until the tracks run out.

  4. Typical industry hype from Meyer. Rah, Rah, Blah, Blah. The Chinese want to keep their options open and play along with it. Let’s use the gas for value added industries and forget about export. First lets separate the liquids portion for some extremely profitable industries. The leftover Methane could be used for generating HVDC from the slope to the railbelt. As usual we are played for fools.

  5. Walker and now Meyer seem to wake up on a new nest just about every day. Is there any rational thinking person that believes a gas pipeline from the slope will be viable in the foreseeable future? Today’s gas sells on the world market for a little over $3.25 per million BTUs. After building a pipeline for nearly $50 Billion the state would have to get a little over $10.00 per million BTUs to pay for the drilling and construction. Just to break even!
    Thank goodness this madness is about to end.
    Go Huggins / Meyer!

  6. When I was younger I hoped to work on the gasline……then years..then decades passed. So now it will kick off just as I reach old fart-hood. “work could begin in 2018 with construction kicking off in 2019” and monkeys could fly out of my *** in 2017! Sorry dude – I still take the hook every time the gasline is announced.

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