By Yereth Rosen
ANCHORAGE, Alaska Oct 4 A pipeline and plant
that would ship natural gas from Alaska's North Slope to
international markets could cost between $45 billion and $65
billion, according to the companies pursuing the "mega-project."
The estimate results from joint studies into the feasibility
of a liquefied natural gas plant to ship gas to Asia conducted
by Alaska's three major oil producers -- Exxon Mobil Corp
and partners BP Plc and ConocoPhillips --
and Canadian pipeline operator TransCanada Corp.
The three oil producers agreed in March to work with
TransCanada on the project, which seeks to find a market for gas
currently stranded in the remote North Slope oil field.
The cost estimate includes a liquefaction plant and shipping
facilities to serve a fleet of 15 to 20 tanker vessels that
would transport the LNG abroad, according to a letter sent to
Alaska's governor, Sean Parnell.
The amount is in addition to the 800-mile (1,290-km)
pipeline and a gas-handling plant contained in a 2010 project
proposed by TransCanada and estimated to cost up to $26 billion,
the Canadian company said.
"Individually, each of these components would represent a
world-class project," said the letter to Parnell, which was
released by his office late on Wednesday. "Combined, they result
in a mega-project of unprecedented scale and challenge."
TransCanada and Exxon had previously been looking at a
proposed $41 billion overland pipeline project through western
Canada to reach U.S. markets, which have been facing a gas glut
due to booming production from shale fields.
BP said that after being unable to find buyers to the south,
the focus shifted to potential LNG exports to Asia.
The three big oil companies, in an Oct. 1 report to Parnell,
said an Alaska LNG project would require up to 1.7 million tons
of steel and 15,000 workers at its peak, while creating 1,000
permanent jobs. It would ship 3 billion to 3.5 billion cubic
feet per day. And while there is no estimated startup date, the
entire process of approval and building could take about a
Alaska Natural Resources Commissioner Dan Sullivan said on
Thursday he was unfazed by the size of the cost estimate.
"It's a range, right? And we want to work to keep it on the
lower part of that range," he said at an Anchorage news
conference. "It does come in line with some very large projects
that are being developed around the world."
He cited Chevron Corp's Gorgon LNG project in
Australia, which was originally estimated to cost $37 billion,
as comparable in scale and cost.
Alaska officials have actively promoted Alaska LNG to
potential Asian customers, citing benefits other than price,
Sullivan said. The potential consumers want natural gas options
that provide "diversity of supply and reliability."
"We do bring to the table comparative advantages that other
projects, in my view, other projects don't have," he said.
Potential LNG competitors in British Columbia, for example,
still must resolve political issues such as claims by the First
Nations there. "Those can take years," he said. "We, obviously
in Alaska, have resolved those."
He said LNG exports from other U.S. locations would face
regulatory and export license concerns that do not apply to
Alaska. The state is already home to the only operating U.S. LNG
export facility, the ConocoPhillips-owned plant in Kenai, south
of Anchorage, which has shipped to Asian customers since 1969.
Exxon and ConocoPhillips were not immediately available for
Alaska and federal officials have tried unsuccessfully since
the 1970s to find a way to ship North Slope gas to markets. A
pipeline project was permitted in the Carter administration, but
never built because of poor economics.
Geologists believe the North Slope may hold vast reserves of
undiscovered natural gas in addition to the known reserves of 35
trillion cubic feet. But companies have so far had no incentive
to search with no easy way to ship it out.
Most of the known reserves are in the Prudhoe Bay field,
where oil has been produced since 1977. Companies routinely pump
up to 8 billion cubic feet a day of gas during oil-extraction
operations, and they reinject that back into the reservoir.