TAGS SPONSORS DEFER SOME PROJECT SPENDING

Sponsors of the $11 billion Trans-Alaska Gas System to export Alaskan North Slope gas as LNG to the Far East have deferred certain spending on the project.

Yukon Pacific Corp. (YPC), Anchorage, citing lack of buyer commitments needed for a projected start-up in 1997, is deferring outlays on some front end engineering aspects of the project.

DEFERRAL, BACKGROUND

The move means layoff of about 20 YPC personnel and scaling back certain undisclosed engineering contracts.

Bechtel Corp. is undertaking preliminary design work for a $3 billion gas liquefaction plant and LNG carrier terminal near Valdez, Alaska.

The gas would move via an 800 mile, 36 in., 2.3 bcfd pipeline from a gas conditioning plant at Prudhoe Bay to a point near Valdez paralleling the Trans-Alaska Pipeline System.

Initially, plans called for LNG plant site work to begin in summer 1992 and pipeline construction to begin the following summer (OGJ, Dec. 25, 1989, p. 34).

YPC had budgeted $300 million for preliminary design engineering on the project under the contract awarded Bechtel in November 1990.

A YPC official said the deferral does not necessarily mean a postponement of the project. What's needed for a 1997 start-up is a commitment by Japanese buyers to purchase at least 7 million metric tons/year of LNG during that time, he said. Those sales volumes presumably would build to 14 million tons/year in 5-6 years.

"Now it looks like 2000 before those commitments will be there, so we reevaluated whether we want to spend money on additional engineering until the market commitments are there," the official said.

He noted that if the Japanese buyer commitments are forthcoming in the interim, however, the project could be placed on a fast track again.

LNG MARKET OUTLOOK

YPC recently completed another study updating a 1986 projection of LNG markets to support the project.

"It reaffirmed the demand will be there," the official said. "Now it looks like there will be a need for 30 million metric tons of additional LNG supply by 2000."

Earlier estimates put that incremental Far East LNG demand at 24 million metric tons by 2000. "It's a matter of integrating planned grassroots projects-such as Qatar, (Malaysia's) Natuna Island, and (U.S.S.R.'s) Sakhalin Island-with expansions from other, existing projects as the Japanese look for supply diversification. One or two grassroots projects will have to meet that expected demand."

In addition to LNG sales to Japan, TAGS is targeting sales to South Korea and Taiwan. South Korea's Korea Gas Corp. recently signed a letter of intent covering purchase of 2 million metric tons/year of LNG from TAGS.

YPC is owned 85% by CSX Corp., 13% by Alaska Gov. Walter J. Hickel-through a blind trust since his election this year-and 2% by individual investors.