The state of Alaska and ConocoPhillips have signed an agreement to negotiate the formation of a joint venture company that could buy and sell North Slope natural gas to utilities outside Alaska.
The state and the oil company will also try to bring ExxonMobil and BP into the joint venture, according to a statement from the Alaska Gasline Development Corp., the state corporation that represents Alaska in the $55 billion Alaska LNG project.
The need to focus on marketing and lining up buyers for Slope gas has long been advocated by Gov. Bill Walker, who spoke at a conference in Singapore on Wednesday to pitch the natural gas opportunity in Alaska and discuss the project the state has studied in recent years with the three energy giants.
In a prepared statement from Singapore, Walker said he was pleased with the development. "ConocoPhillips has played an integral role in developing our state's gas reserves, and has been shipping LNG from Nikiski to Japan markets for over 40 years – the longest such contract in LNG history. This joint venture will provide new opportunities to develop our LNG resources for a global market."
With low oil prices hurting their income, the producers have backed away from that project as it is currently structured. But they are interested in one day selling their gas and have indicated they would support a project led by the state, a change from the current structure led by ExxonMobil that is underway.
"We look forward to working together with AGDC and taking steps we hope will lead to commercializing North Slope gas," said Amy Burnett, communications specialist at ConocoPhillips.
ConocoPhillips operates the Kenai Liquefied Natural Gas Plant built in 1969 that for decades was the only LNG export facility in the U.S., using gas from Cook Inlet in Southcentral Alaska.
Burnett said ConocoPhillips has been a "consistent proponent of joint venture marketing for this project. We have taken this first step with AGDC as a means to try to initiate this joint venture process," she said.
The AGDC statement said activities of the joint venture, if formed, would include:
• Pursuing a federal tax exemption for a state-led project;
• Pursuing low-cost financing and investor options for a project that has so far been financed by the state and the producers;
• Finding an engineering company interested in participating and shouldering a big part of the construction risk;
• Securing a gas supply contract from the oil producers, who have said they will sell their gas to the state at reasonable terms;
• Studying opportunities for sales in the global LNG marketplace.
For decades, vast amounts of Slope gas have been produced and re-injected underground to pressurize reservoirs and increase oil production, but the state and partners see a new role for that gas in the coming years. But the remote location would also require construction of an 800-mile gas line.
A recent study found the Alaska LNG project not competitive on a global scale, spurring the state's efforts to seek a tax exemption and lower costs in other ways.
Part of the goal of the memorandum of understanding finalized on Tuesday between the state and ConocoPhillips is raising market awareness about Slope gas.
AGDC., which signed the agreement, would not provide a copy. It is not a public document, said Josie Wilson, communications manager for AGDC.