Alaska is to join a natural gas export project by contributing more than 10 percent of the total cost.
Under a framework agreed between the state and the four companies Alaska has a 25 percent stake in a proposed gas processing plant, an 800-mile (1,287-kilometer) pipeline from Alaska’s North Slope and a liquefaction facility in the Kenai Peninsula.
“This is the first time we’ve had all of the parties aligned on a path forward,” Joe Balash, the department’s commissioner, said in a phone interview before the announcement. The deal gives the project a “good shot” at proceeding, he added.
The shipment of gas is expected to begin as early as 2021, which will enable Alaska to keep pace with an increasingly competitive race to provide Asian countries with liquefied natural gas, or LNG, from North America.
According to a November 2013 Black and Veatch Ltd, a study produced for the state, the final project bill can reach up to $54 billion, although the original cost is estimated at $45 billion. The producers estimated in a February 2013 letter to Parnell that the project costs could possibly escalate to $65 billion.
Under the agreed framework, Alaska will assume a 20 to 25 percent stake in the entire project. TransCanada will pay the state’s costs for its share in the $22 billion gas processing facility and pipeline in exchange for a lower tariff for shipping the gas. That is equivalent of a $5.5 billion investment.
The state would contribute $5.75 billion for its share of the $23 billion liquefaction facility, which is forecasted to yield 18 million metric tons of LNG a year. The producers would cover the rest of the $45 billion total project cost.
Alaska’s huge reserves of gas have remained largely untouched since the 1968 discovery of the Prudhoe Bay oil field. It has been estimated that the North Slope holds more than 35 trillion cubic feet of gas, which is almost four times the U.K.’s reserves.
According to the International Energy Agency, global gas demand set to increase almost 50 percent by 2035, and countries such as Canada, the U.S. and Mozambique are in a competition for a share of it.