Elected officials who say the proposed Alaska North Slope natural gas project is closer than ever to putting steel pipe in the ground and money in the pockets of construction workers should take a break from their political grandstanding and pay attention to the facts.
Not a single analyst tracking gas projects around the world ever mentions Alaska when they list developments with the best potential of getting built. They talk about multiple liquefied natural gas export projects going to construction along the U.S. Gulf Coast, in Qatar, Mozambique, Papua New Guinea, Australia, even Russia, but not Alaska.
The state has spent close to $1 billion on multiple variations of a North Slope gas pipeline in the past 20 years, and has permits, rights of way, engineering work and studies in hand — but not one investor or partner or customer is willing to sign a contract, write a check and take any risk. It’s all on the state treasury at the moment and has been for years, including several hundred million dollars for the state-led project to liquefy the gas for seaborne export to Asia.
Just a few months ago, the Legislature and governor agreed to write an additional $5.5 million in checks on the state treasury to keep the dream alive another year.
And yet after spending all that money on gas line dreams, the state is offering to sell 75% ownership in the venture for $150 million so that it can pay to finish engineering and design work while shopping for investors and financing for the tens of billions of dollars needed to build the project. But even at that discounted asking price, no one has signed a deal.
The North Slope producers walked away from the expensive and unreachable dream in 2016, turning over their work with best wishes to the state.
Meanwhile, the Alaska Gasline Development Corp., a state entity that has never built a pipeline, says its 2020 cost estimate for the project has increased only about 10% in the past three years and is now close to $44 billion. That would be a financial miracle compared to what is happening with similar LNG and pipeline projects in North America.
Bechtel, which has constructed multiple liquefaction plants around the world, recently added more than 20% to its 3-year-old price quote for an LNG terminal it will build in Texas.
The Coastal GasLink pipeline that will serve an LNG project under construction in Kitimat, British Columbia, is now pegged at almost US$11 billion, more than double the original estimate of less than $5 billion five years ago. The pipeline is about half the distance of the proposed 807-mile Alaska project.
The latest estimate for the unfinished Trans Mountain oil pipeline expansion project — adding 607 miles of new pipe from Alberta to the British Columbia coast — stands at $23 billion. The original estimate five years ago was under $3.5 billion.
Alaskans need to pay closer attention to the very real risk of cost overruns, the state’s improbable construction schedule that says export cargoes could go to sea by 2031, and declining world interest in burning fossil fuels.
For all those reasons — plus the lack of any major oil or gas company partners — potential buyers in Asia are skeptical of the Alaska project, according to a report in The Wall Street Journal last week. In addition, “people are so unsure about the future of LNG,” Tatsuya Terazawa, head of the Institute of Energy Economics Japan, told the newspaper. “As of now they see huge demand, but what will happen 10 years or 15 years from now remains a question mark.”
Japanese officials told The Wall Street Journal that the further out a project’s timeline extends, the more it could conflict with the country’s commitment to reach net-zero carbon emissions by 2050.
LNG imports are in decline in Japan, down 15% from 2016, with a long-term decline projected in South Korea as buyers respond to high prices, improved energy efficiencies and look more to renewable energy.
It’s time Alaskans acknowledge that the governor’s “we’ve never been closer to a gasline” slogan is 807 miles short of reality. It’s time to stop spending money that could be better spent elsewhere.
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