AD Main Menu

Exxon Mobil chief mentions Alaska natural gas as export possibility at shareholder meeting

Aaron Jansen illustration

Momentum continues to build for exporting U.S. natural gas reserves to overseas markets, particularly Asia.

Alaska's congressional delegation, as well as Gov. Sean Parnell supports the idea. Early this year, Parnell announced incremental success with bringing together the state's big oil and gas companies -- Exxon Mobil Corp., ConocoPhillips and BP --- behind a proposed project to export Alaska's vast natural gas reserves in the Arctic to international markets, such as Japan, which is shopping for gas after shutting down much of its nuclear power industry after last year's earthquake and tsunami.

Exporting Alaska's natural gas to Asian markets was once frowned upon by most of the state's leaders and the big oil companies. Now, the idea amounts to a "plan B" for Alaska gas after former Gov. Sarah Palin's attempt to spur construction of a $40 billion natural gas pipeline to Canada to supply the Lower 48. The explosion in shale gas in the Lower 48 has all but killed the demand for Alaska's gas.

Exxon chief executive Rex Tillerson last week mentioned Alaska's untapped natural gas reserves -- and their potential for export -- at the corporation's annual shareholder meeting. He didn't get into specifics, according to a news brief from the Federal Coordinator for Alaska Natural Gas Transportation Projects. But Tillerson did say that exporting reserves would be a "means for better coping with ultra-low North American prices."

Among the options Exxon Mobil is evaluating are exporting from the Exxon-ConocoPhillips-Qatar Petroleum Golden Pass terminal on the Gulf of Mexico, which can handle 2 billion cubic feet of natural gas per day, exports from Canada's British Columbia coast and Horn River Basin, and exporting Alaska's gas.

"It's a question of what is going to be the most competitive of those," Tillerson said.

What's it mean for Alaska, which has for decades awaited the next pipeline boom?

Exxon holds the majority of leases to develop Alaska's Prudhoe Bay oil and gas field,  as well as the undeveloped Point Thomson field. Estimated reserves at Point Thomson include 8 trillion cubic feet of natural gas and hundreds of millions of barrels of petroleum liquids. Point Thomson's estimated worth (in royalties, taxes and payments) to the state of Alaska would be worth more than $100 billion -- if it is ever developed.

Exxon recently settled a contentious and high-stakes lawsuit with the state over the company's obligations to develop Point Thomson. Part of the settlement requires Exxon and its partners to develop the field or face losing their leases.

Under Parnell's new vision for a mega natural gas project, he wants the pipeline to be built paralleling at least some of the 800-mile trans-Alaska oil pipeline, terminating at a deepwater port somewhere in Southcentral Alaska, be it Valdez or perhaps Cook Inlet.

But market dynamics -- along with dealing with the state's controversial tax structure -- will also play a role in Exxon's and other companies' decision of whether to tap the state's vast conventional gas reserves -- the largest in North America.

Contact Eric Christopher Adams at eric(at)alaskadispatch.com