Guide to Alaska natural gas projects.

• Author: White, Bill
• Position: OIL & GAS - Reprint

Ideas for moving Prudhoe Bay's natural gas bounty off Alaska's North Slope are as plentiful as cottonwood seed in the June air.

Some are modest: Truck small amounts of gas to Fairbanks consumers.

Some are epic: Pipe massive amounts to a Southcentral Alaska liquefied natural gas plant for LNG shipments to Asia--the most expensive North American private-sector construction project ever.

Some are pinned to visions of an Alaska energy utopia, where gas for local use is plentiful and relatively cheap, the oil and gas industry develops new fields by the dozen, the state treasury overflows with wealth, and new industries sprout from the earth like wild lupine.

Some are backed by tens or even hundreds of millions of state dollars to help design, engineer and otherwise prepare for construction. These include the big producer-led LNG project, a much more modest state-led pipeline to Southcentral Alaska and the Fairbanks trucked-LNG project.

Some are little more than a concept looking to catch on.

The great North Slope oil discoveries of the 1960s and 1970s also found an estimated 35 trillion cubic feet of natural gas--almost one and a half times the entire volume of U.S. production in 2012. The U.S. Geological Survey estimates an additional 221 trillion cubic feet await discovery in Alaska's Arctic, onshore and offshore. If only an economically viable way could be found to move the gas to consumers.

Below we summarize several proposals--big and small--for transporting natural gas from Alaska's North Slope.

LNG Export Project

This would involve an approximately 800-mile mostly buried pipeline from the Prudhoe Bay field on Alaska's North Slope to Southcentral Alaska, possibly Valdez, possibly Nikiski, or somewhere else along Cook Inlet or Prince William Sound. At the port, a plant would chill the gas to minus 260 degrees to create liquefied natural gas, or LNG, a compressed form of the gas that can be shipped on insulated tankers to markets worldwide.

The 42-inch-diameter pipeline under consideration by the major North Slope producers would carry 3 billion to 3.5 billion cubic feet of natural gas per day. Alaskans would use some of this gas, and running the pipeline and LNG plant would consume some. The plant would make 15 million to 18 million metric tons a year of LNG, the equivalent of 2 billion to 2.4 billion cubic feet a day of gas. That would place it among the world's largest LNG plants.

SPONSORS: Three separate groups are discussing such an LNG export project.

1. ExxonMobil, ConocoPhillips and BP, the main North Slope producers, plus pipeline company TransCanada, in March 2012 said they are considering a project to export LNG to Asia, where the gas currently can fetch a much higher price than in North America. They are in the early stages of considering this option. Two of the sponsors--ExxonMobil and TransCanada--in 2010 proposed to build a 48-inch buried pipeline to Valdez, with someone else constructing and operating an LNG plant there. They found insufficient customer interest at that time to pursue the project. But the global LNG market has changed since then, and they have taken up the new LNG effort with ConocoPhillips and BP.

2. A Japanese company called Resources Energy Inc. is proposing an LNG plant in Southcentral Alaska that could start up in 2019 or 2020 and eventually produce 15 million to 20 million metric tons a year. The company was formed in late 2011 by Japan's Hyogo Prefecture, a regional government, as well as other business interests and several small Japanese utilities affected by that nation's nuclear power plant shutdowns following an earthquake and tsunami that year.

   REI said it completed feasibility studies in spring 2013 that cost $10 million to $20 million and verified its concept will work for supplying lower-cost LNG to Japanese utilities. REI would rely on others to produce the natural gas and build a pipeline from the North Slope to its plant. REI said it is working to find investors in its idea.

3. The Alaska Gasline Port Authority has proposed a government-owned Valdez LNG project. The port authority was formed in the late 1990s and is a joint venture of the Fairbanks North Star Borough and Valdez, two local governments along the pipeline route. In 2013, the U.S. Department of Energy dismissed the port authority's application to export about 19 million metric tons of LNG annually from Valdez. In its letter, the department said the port authority had no natural gas under contract, no pipeline and no leased or committed site for an LNG plant. The port authority then issued a press release saying: "We will continue to work with the Department of Energy on our export license application to satisfy the issues raised in its letter."

   ESTIMATED COST: $45 billion to more than $65 billion (2012 dollars) for the producer-led project.

   ExxonMobil, ConocoPhillips, BP and TransCanada say their cost estimate would cover a pipeline from the Point Thomson gas field to Prudhoe Bay, a massive gas treatment plant at Prudhoe Bay, the roughly 800-mile pipeline to tidewater and compressor stations along the way, a liquefaction plant at a Southcentral Alaska site to be determined, LNG storage tanks and a tanker terminal.

   REI estimates the cost of its LNG plant and shipping terminal at $20 billion to $24 billion. Including a North Slope gas treatment plant and pipeline would bring total development costs to $38 billion to $45 billion, REI says, though it would prefer that someone else take the lead on those pieces.

   The port authority has no recent cost estimates for its concept.

   GAS FOR ALASKANS: The pipeline concept pursued by the oil producers and TransCanada would provide at least five points from which spur lines could be built to provide gas to Alaskans. This project involves only providing gas-takeoff points, not building the spur lines or local distribution pipelines, which would be up to the state, utilities or private companies.

   REI says gas could be taken for local use, but it does...