The state gas line corporation has signed an agreement with Tokyo Gas that makes it a potential buyer of Alaska gas, adding enthusiasm to the state's plans to develop a $43 billion gas project with help from the Chinese.
Keith Meyer, president of the Alaska Gasline Development Corp., said Monday the agency had signed the nonbinding "letter of intent" with the company in Tokyo earlier in the day.
The agreement expresses Tokyo Gas' interest in buying liquefied natural gas from the proposed Alaska LNG project, Meyer said. The large Japanese utility also has the opportunity to explore other ways to support the Alaska LNG project, which is currently looking for investment partners.
The megaproject, requiring the building of massive facilities including an 800-mile pipeline, lacks funding for construction. It isn't expected to begin production until at least 2024, if it's ever built.
State gas line officials have made trips to Asia to find investors and gas buyers who would receive tankers of liquefied gas, using gas sourced from the giant North Slope fields.
The state agency last month signed an important but nonbinding deal with major Chinese-owned entities, including oil and gas company Sinopec, that could allow the foreign firms to provide financing for 75 percent of the project while receiving 75 percent of the project's gas.
The gas line corporation has envisioned selling the remaining 25 percent of the gas elsewhere in Asia.
That's where Tokyo Gas might come in, possibly buying much of the gas sold by the state, Meyer said. Meyer provided some details about the agreement with state lawmakers at a project update Monday night before the Alaska House Resources Committee.
Meyer said the agency will not release the agreement because it could provide an advantage to competitors pursuing other gas projects outside Alaska that don't release their nonbinding agreements.
Meyer said the administration of Gov. Bill Walker, not the gas line agency, chose to publicly release the agreement with the Chinese entities.
Larry Persily, former federal coordinator for Alaska gas pipeline projects under President Barack Obama, said the agreement with Tokyo Gas is a good thing to have in the agency's file.
But he added it doesn't change underlying issues that must be resolved for the project to advance, including firm commitments for financing and investment, and regulatory approval for the project.
"You'll want a thick folder of potential customers to turn to and strike deals with, but we have a ways to go before that happens," Persily said.
Tokyo Gas has purchased LNG from a privately operated plant in Nikiski along Cook Inlet for more than four decades. The plant was the world's largest when built in 1969, but is small by today's standards and hasn't shipped a tanker-load of gas since 2015. ConocoPhillips has put it up for sale.
A statement from the agency quoted Tokyo Gas president Michiaki Hirose as saying Alaska has long been a "trusted source" of LNG.
"As the closest source of North American LNG to Japan, with a shipping time of as little as seven days point to point, Alaska LNG is naturally an economic and reliable source of LNG" for the company, the statement said.
Hirose traveled to Juneau in August and discussed the project with Walker and other state officials. Lieza Wilcox, an AGDC vice president, was in Tokyo on Monday to complete the agreement, Meyer told lawmakers.
Japanese entities have taken steps to get in line for Alaska's North Slope gas before. In 2014, the state under then-Gov. Sean Parnell signed a nonbinding agreement with Japan's Ministry of Economy, Trade and Industry as the ministry sought to ensure that Japanese entities could buy gas at good prices from a stable region.
That agreement also involved Alaska LNG, though the project then was led by ExxonMobil. The oil giant and the state's other previous partners that own most of the gas for the project, BP and ConocoPhillips, backed out of Alaska LNG late last year over concerns it wasn't competitive with other LNG projects around the world.