Plans to export liquefied natural gas (LNG) from the continental United States has generated controversy among U.S. politicians, environmental groups and U.S. manufacturers, but unlike LNG export projects proposed in the continental United States, no controversy over LNG exports from Alaska exists in the state, said Alaska Department of Natural Resources (DNR) Commissioner Dan Sullivan in a recent interview with Rigzone. Compared with the Lower 48, an Alaskan large-scale LNG project would not face the regulatory risk that projects in the Lower 48 do.
In fact, Sullivan believes an Alaska-based LNG export project makes sense, given Alaska's abundant natural gas resources and close proximity to Asia, where LNG demand will continue to grow in the coming years.
While some U.S. manufacturers have expressed concerns that LNG exports will drive up gas prices and divert supply away from home, a large Alaska LNG project will get more gas to Americans, not less, said Sullivan, who pointed to a 1988 finding by then-President Ronald Reagan in which Reagan concluded that exports of Alaska natural gas of more than 1,000 million cubic feet per day would not diminish the total quantity or quality nor increase the total price of energy available in the United States.
Sullivan, who noted that Alaskan officials have seen Asian companies expressing interest in LNG from Alaska, cited recent studies by the Brookings Institution and Wood Mackenzie that indicate Alaskan LNG is cost competitive compared with other global LNG projects.
The Brookings Institute reported that an Alaska project may be one of the least costly alternatives for delivering LNG in 2020 to Japan. The nation has sought to replace the loss of nuclear power due to the Fukushimu earthquake and tsunami in 2011 with natural gas.
An Alaskan LNG project offers a number of comparative advantages, including existing oil and gas infrastructure on the North Slope which can be utilized for a large-scale LNG plant. The route for a large scale LNG project would be the same or similar to the existing Trans-Alaska Pipeline System (TAPS) pipeline route, which will save on costs and have a limited impact on the environment. The state's labor costs are lower relative to other regions, particularly Australia, and Alaska has a highly skilled workforce available for future development, said Sullivan.
Alaska's close proximity to Japan and a location that avoids strategic shipping choke points that other sources of LNG must traverse, U.S. legal and political stability and very low shipping costs are other benefits. While a number of Canadian LNG export projects have been proposed for construction on Canada's West Coast, Sullivan sees regulatory issues facing these projects that could take decades to solve. On the other hand, First Nation and Native land claim issues surrounding an Alaskan LNG project already have been resolved.
The fact that Alaska is located in a colder climate significantly decreases processing costs compared to LNG projects in warmer climates. Additionally, North Slope gas is wet gas with a high energy content, and ideal for LNG.
Unlike unconventional gas, which requires hydraulic fracturing to produce, conventional gas is not controversial, Sullivan commented.
"At Prudhoe Bay, we're reinjecting 8 [billion cubic feet per day] of gas, which is enough to meet Canada's daily gas needs."
Alaska's North Slope is estimated to hold over 200 trillion cubic feet (Tcf) of conventional gas, and has 35 Tcf of known reserves. These numbers do not include the trillions of cubic feet of shale gas, tight gas, and gas hydrates estimated for the North Slope. Thanks to new technology, an almost inexhaustible supply of gas would be available.
The state already has an LNG export facility, Kenai, which has shipped 2.5 Tcf of LNG to Asia, mostly to Japan, for 42 years.
"The Japanese think that it is a record of reliability that we have never missed a cargo, and unlike the Russians, we don't shut off our gas when we're made at someone," Sullivan noted.
Unlike other areas where securing resources for LNG projects has proven a challenge, Alaskan officials know what exactly what is on the North Slope.
Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at firstname.lastname@example.org.