State, BP reps travel to Asia to launch marketing efforts for Alaska LNG

A delegation of state officials and BP executives spent four days in Asia last week meeting with utilities and others entities that could one day be involved in buying natural gas from the massive Alaska liquefied natural gas project that continues to advance but remains years from reality.

The trip to China, South Korea and Japan -- the world's largest LNG importer -- included cabinet members Joe Balash and Angela Rodell from the administration of Gov. Sean Parnell, as well as Dan Fauske, head of the Alaska Gasline Development Corp., and Janet Weiss, regional president of BP Alaska.

Balash, commissioner of the Department of Natural Resources, said the trip stemmed from the Heads of Agreement, the guidance document for the Alaska LNG project, which requires the gas owners to initiate marketing efforts for the project. BP initiated this effort.

It was the first such trip for the project -- estimated to cost anywhere from $45 billion to more than $65 billion and calling for overseas gas deliveries after construction of an 800-mile pipeline across Alaska, a liquefaction plant in Nikiski and other structures.

Participants in the project are the state, pipeline builder TransCanada and Alaska's three major oil producers -- Exxon Mobil, ConocoPhillips and BP.

The travelers spent the first two days of the trip in Tokyo. It didn't take long for them to hear good news for the long-sought gas project, the state's latest effort to tap into the North Slope's vast natural gas reserves after decades of failed attempts.

The news Monday came in the form of a headline in the Nikkei Asian Review: "Japan to help its companies procure LNG from Alaska."


The article said Japan's Ministry of Economy, Trade and Industry "will assist domestic businesses in importing natural gas produced in Alaska, hoping to secure a relatively low-priced fuel from a region not susceptible to geopolitical risks."

"The ministry plans to offer financial assistance to Japanese trading houses or engineering firms if they participate in the construction of LNG facilities in Alaska," the article said. "It will also consider using programs that allow the government to guarantee up to 75 percent of borrowing for gas procurement projects or to shoulder half of investment in such projects."

The article said the ministry would sign a memorandum of cooperation with Alaska designed to ensure Japanese electric and gas utilities secure favorable gas prices and other terms. The state announced the agreement last week.

Parnell officials have said the Alaska LNG project has made unprecedented progress. Balash said the busy visit overseas likely included at least one first: The Natural Resources department directly marketing LNG.

At a meeting in Tokyo, Balash and Weiss presented to representatives of 15 potential buyers of LNG gas -- representing most of the LNG buyers in Japan -- as well as three governmental entities, said BP's Damian Bilbao, vice president of business development for the Alaska LNG project.

There was also a chance for personal follow-up with representatives from all the organizations, including at a reception, Bilbao said.

Each was impressed with the state's involvement as a project investor and an organizer pushing to have deadlines met, as well as the strength of a partnership tying together the state and four prominent energy companies, said Bilbao.

"They understood why we have been able to progress much farther this time than we ever have in the past," he said.

Balash said that two of the companies the group met with were Tokyo Electric Power Company and Mitsubishi.

Bilbao said he could not name the companies but that one of the potential buyers called the Alaska LNG partners a "dream team from a buyer's perspective," Bilbao said.

Some wanted to know what distinguished the Alaska project from other LNG projects being pursued around the world, including in western Canada. The state's involvement and the huge amount of gas available were presented as some of the distinguishing characteristics, Bilbao said.

Japan has been seeking stable, long-term alternatives to nuclear energy following the Fukushima nuclear disaster in 2011. Alaska Department of Revenue Commissioner Angela Rodell said the trip was important because the state was able to learn about the growing demand in Asia for LNG.

She said the Japanese government entities play an important role in assessing demand and providing financing, such as the Japan Bank for International Cooperation, with which the state has also signed a memorandum of cooperation.

"It was an opportunity for the state to talk about potential partnerships should the state choose to go that route, or buyers choose to pursue that route," she said.

She said the project is so massive, some of its sponsors may one day seek Japanese investment in the Alaska effort. There may be "upside" to opening up part of the project to Japanese investors, but it's too early to say if that would make financial sense or not, she said.

The Alaska LNG project is in its early phases, conducting preliminary engineering and design studies to collect data needed for permitting. In early 2016, the partners must decide if they want to move forward to conduct more extensive studies. A final investment decision is not expected until 2018 or 2019, and construction will take at least another five years after that.

Full costs for the state's portion of the trip were not yet available on Monday, said Elizabeth Bluemink, a spokeswoman with the Department of Natural Resources who did not travel with the group. BP paid for its own costs, said Balash.


After Tokyo, the group traveled to Hong Kong and then drove to Shenzhen, to see an LNG facility where BP and the Chinese National Offshore Oil Corporation are owners of a regasification facility, Rodell said. They also operate what she described as filling stations where contracted truck drivers load up with gas.

The trucks are used in areas that aren't densely populated, an approach the state must take to deliver gas when pipelines can't economically be built, Balash said.

From there it was on to Seoul, South Korea, where the group met with KOGAS, Korea's natural gas company and the world's single largest LNG buyer.

"From my standpoint it was real honor to (travel to Asia) and talk about what we're doing on this project," said Rodell. "It's going to require continued conversations and relationship-building but we started the process, so I'm excited."

Another group of potential Japanese investors is Resources Energy Inc., with offices in Anchorage and Tokyo and interest in LNG projects involving Cook Inlet gas as well as possibly North Slope gas one day, said Mary Ann Pease, vice president and general manager for the group. Delegates from Japan -- including with the Hyogo Prefecture, Mitsubishi Gas Chemical, and TKK, the largest LNG tank manufacturer -- traveled to Anchorage this week to attend or speak at the Alaska-Japan Opportunity Summit at the annual Alaska Oil and Gas Congress on Monday, she said.

Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or