Governor Bill Walker's trip to Japan: commercializing Alaska's untapped LNG potential.

• Author: Swann, Kirsten
• Position: OIL & GAS

As the state of Alaska faces a looming budget crisis driven by low oil prices and declining production, the clamor over a proposed multibillion-dollar liquefied natural gas (LNG) pipeline project grows louder.

The endeavor--known as Alaska LNG--involves building a gas treatment plant, pipeline, and liquefaction plant to successfully commercialize the trillions of cubic feet of North Slope natural gas. Project partners include the state and its largest oil companies: ConocoPhillips, BP, and ExxonMobil.

The proposed forty-two-inch pipeline could carry up to 3.5 billion cubic feet of natural gas per day, according to the Alaska Natural Gas Transportation Projects Office of the Federal Coordinator. Some of that gas would be consumed by Alaskans; some would be sold outside the state. The plant could produce up to 20 million metric tons of LNG every year, processing 2.5 billion cubic feet of gas every day. It would be among the largest natural gas developments in the world.

The total price tag could top $60 billion, according to a report by project financial consultant Lazard, but success could bring the state approximately $4 billion in gross revenues annually.

Developing a major gas pipeline project is a high-stakes business.

Special Session

In September, Alaska Governor Bill Walker voiced his frustration with the lack of progress on Alaska LNG, calling the Legislature into special session in October and stating the need for a "bold move" to move things forward.

"I'm a big believer that if you don't know your history, you're destined to repeat it, and that's the problem we've had with the gas line for the last several decades," said Walker in a September press conference.

The governor brought up the topic of a gas reserves tax to prevent individual partners from blocking the project and called for firm state control over state-owned resources. But advancing a major commercial gas project also calls for fiscal and regulatory certainty--just ask the companies who hold stakes in the project.

"A competitive, predictable, and durable fiscal and commercial environment is required for this project to compete in global energy markets and to position the Alaska LNG project for a successful investment decision," wrote ExxonMobil spokesman Aaron Stryk in an emailed statement. "Advancing the Alaska LNG project, with alignment among all resource owners and the state, is the best way to build confidence for financing, investors, and the market."

Fiscal...