Alaska LNG to Change USA LNG Industry
USA has made immense progress in exporting its abundant supply of LNG. The job, it seems, is not done. There is a major LNG megaproject in the works in Alaska that could change natural gas markets across the globe. But is it meant to come to fruition?
The Alaska LNG project is one of the world’s biggest natural gas development enterprises. The plan is to build a gas liquefaction plant, marine terminal and a pipeline in Nikiski, on the Kenai Peninsula. For years, the ambitious project has stalled and previous investors, such as ExxonMobil Corp., ConocoPhillips and BP, have withdrawn their support. Not to mention, low gas prices and a global glut of LNG has made the project challenging to develop.
Now, however, the project has attracted the attention of China’s top oil company Sinopec. It has agreed to partner with the U.S. government, Alaska Gasline Development Corp. (AGDC), the state of Alaska, China Investment Corp. and the Bank of China to develop the Alaskan pipeline to send LNG to Asian markets. Its projected to cost as much as $43 billion.
What will the main players gain from this megaproject? As the third largest LNG consumer in the world, China will get a stable supply of cleaner energy and will hold 75% of the project’s capacity. For the United States, the construction could create 12 thousand jobs and strengthen the shaky political relationship between the US and Asia by lessening the trade deficit by about $10 billion a year. Specifically for Alaska, this would raise its profile as an important LNG hub and bring in revenue to the state. Keith Meyer, president of AGDC, estimates the latter could amount to $250 million.
However, even with China’s support, an agreement which is as of yet non-binding, there is still a need for further investments to compete with shale projects that have lower costs. AGDC is confident that this will be achieved fairly soon and a final investment decision will be reached in 2019. Once it is secured, the construction could start later that year.
The difficulty with the project is the unforgiving environment of the Alaskan North Slope, where the natural gas is. The remote location and unfavourable weather conditions mean additional investments that could be avoided if a territory with a more agreeable climate is chosen. On the other hand, with President Donald Trump and his administration showing support and the IRS having granted tax-exempt status, it is fair to say the project will go ahead. Will it meet the same fate as before, with investors backing out and the government refusing to finance the project again? It is a possibility, but with China already being an avid importer of LNG from the United States, it is questionable whether they will change their mind about long-term advantages of Alaska LNG project. Nevertheless, North Slope has an abundance of natural gas that will be explored sooner or later, enriching the USA LNG industry. Will it happen in the coming years? There is hope, but it’s still too early to tell.
To learn more about the developments in the USA LNG market, attend the 2nd Annual LNG USA Summit on February 27-28, 2018 in Houston, Texas. It’s where prominent companies like NextDecade, Black & Veatch, Repsol, Steelhead LNG, Protego, Gas Natural Fenosa, Fluor, Petrobras and many more will gather to discuss looming US projects and other LNG market trends.