Japan firms open Alaska office to pursue LNG

Tim Bradner | Alaska Journal of Commerce

A consortium of Japanese companies has opened an office in Alaska with hopes of working with the State of Alaska, North Slope producers and TransCanada Corp. on a large Alaska natural gas liquefaction project, and fast-tracking the project to build it by 2017 or 2018.

The consortium, Resources Energy Inc., proposes to develop and own the LNG plant itself at a south Alaska tidewater port but said it could also invest in the pipeline needed to bring North Slope gas south to the plant, said the company's Alaska Manager Mary Ann Pease.

North Slope producers BP, ConocoPhillips and ExxonMobil, as well as independent pipeline company TransCanada, are working on a potential $45 billion to $65 billion Alaska LNG export project, but have not yet committed to investments in preliminary engineering or made decisions on commercial aspects, such as who would own components of the project.

Members of the Japanese consortium include Japan Petroleum Exploration Co. Ltd.; Idemitsu Kosan Co.; JX Nippon Oil and Energy Corp.; Mitsubishi Gas Chemical Co. and Nippon Telephone & Telegraph.

Nippon Steel Corp. and two Japanese trading companies, Itochu Corp. and Sojitz Corp. as well as the Japan Bank for International Cooperation, are involved in discussions with the consortium members, Pease said.

Pease said the group sent a letter to TransCanada indicating an interest in shipping 2.7 billion cubic feet a day through a potential large-diameter pipeline from the North Slope to south Alaska during the pipeline company's recent non-binding Solicitation of Interest to shippers.

TransCanada said it has received "strong interest" in its solicitation but did not identify potential shippers. Resources Energy is now the second group of Asian companies who are acknowledging submitting letters of interest to TransCanada. On Sept. 16, a group of mostly Korean companies submitted a letter of interest through the Alaska Gasline Port Authority, an Alaska municipal group hoping to facilitate a pipeline and LNG project.

Pease said the Japanese group wants to build and own the liquefaction plant and associated LNG tankers and has in mind a plant capable of shipping up to 20 million tons of LNG per year, a project of about the same scale as that being considered by the Slope producer group.

"We need a deep water and ice-free port for the LNG plant so our preference is now Valdez, on Prince William Sound, but studies are still under way and several locations in Southcentral Alaska are being considered," Pease said.

The group wants to move ahead now with a detailed feasibility study and sees a faster timeline for the project than that contemplated by the producer group and TransCanada.

"We believe we can have this project in operation in 2017 or 2018," Pease said.

In an Oct. 1 letter to Gov. Sean Parnell the producer group laid out a work plan for their project that involves a 10-year plan, so that the first LNG would not be shipped until 2023 or 2024.

The producers' work on a large gas project is linked to commitments made in a settlement of litigation with the state over lease disputes at Point Thomson, east of Prudhoe Bay.

Parnell he was satisfied with the Oct. 1 progress report from the producers but state Natural Resources Commissioner Dan Sullivan said separately that the administration is pushing the group to make firm commitments by mid-spring, 2013.

Pease said the Japanese group is ready to commit now to a detailed feasibility study but wants to do it under the auspices of a Memorandum of Understanding with the state.

"Japanese companies are used to doing business on a government-to-government basis, where there is some official involvement of the state," Pease said.

The state negotiated a Memorandum of Understanding with the Alaska Gasline Port Authority in 2004 to assist the port authority in pursuing an LNG project, and Pease said her group would like something similar.

The state is being cautious in its response so far.

The Japanese group met with Sullivan on the matter in July and was referred to a state-owned corporation, Alaska Gasline Development Corp., or ADGC, which is now working on an in-state gas pipeline system.

Pease said AGDC told the group, however, it cannot work with Resources Energy at this time, because the state corporation said it is in the final stages of securing a federal environmental impact statement, or EIS, for its 24-inch in-state pipeline.

Bringing in new parties could complicate and delay a final EIS for that project, the Japanese group was told, according to Pease.

ADGC also said it is limited to transporting 500 million cubic feet per day under terms of a state agreement with TransCanada. That amount is insufficient to meet the export needs of Resources Energy's owners, Pease said.

Alaska Journal of Commerce