Alaska LNG Project parties sign heads of agreement

ExxonMobil Corp., BP PLC, ConocoPhillips, TransCanada Corp., Alaska Gasline Development Corp. (AGDC), and Alaska’s commissioners of natural resources and revenue have signed a heads of agreement (HOA) for the Alaska LNG Project, laying the commercial framework for development of an 800-mile natural gas pipeline to transport production from the Alaska North Slope (ANS) to a 15-18 million tonne/year LNG plant on its south-central coast.

The HOA is subject to public review by the state legislature this session.

Alaska Gov. Sean Parnell described the agreement as “historic” saying it would allow pipeline development “on Alaska’s terms and in Alaskans’ interests.” The HOA will allow pre-FEED work begin on the LNG plant and establishes a framework for negotiating multiple other project enabling agreements, according to the state.

The HOA anticipates pre-FEED work starting in this year’s second quarter, with a decision on whether to move to the FEED phase expected 3 years later. HOA parties expect the state’s participating interest in each component of the project to be 20-25%.

Preliminary project concept includes three 5-6 million tpy trains at the LNG plant and two jetties designed to load a combined 15-20 LNG carriers/month. An ANS gas treatment plant would remove carbon dioxide from the gas prior to shipment on the 42-48-in. OD pipeline, operating at more than 2,000 psi to deliver 3-3.5 bcfd. The pipeline will include at least five off-take points for a total of 300-350 MMcfd of in-state gas delivery.

ExxonMobil, BP, ConocoPhillips, and TransCanada last year selected the Nikiski area of the Kenai Peninsula as the leading site for the LNG plant (OGJ Online, Oct. 7, 2013).

Terms of the HOA include the state as an equity partner, provide gas to Alaskans, lay out proposed fiscal terms, and allow the possibility of future third-party access to all project components, including a possible additional LNG train at the liquefaction plant.

Following start-up of the Alaska LNG Project, any party with an interest in the LNG plant may initiate the process of installing a new liquefaction train. Any other party with an interest in the plant could then also request additional volumes, increasing the expansion’s capacity. Final ownership interest in any new liquefaction train would be equivalent to equity interest in the train.

Terms also outline AGDC’s role in ensuring Alaska’s interests and allow the corporation to continue pursuit of its own Alaska Stand Alone Pipeline in-state gas line project.

The HOA terminates Dec. 31, 2015, unless extended by mutual agreement of the parties.

Contact Christopher E. Smith at chriss@ogjonline.com.

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