The challenges facing Alaska LNG exports.

• Author: Persily, Larry
• Position: OIL & GAS

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The logistics of getting natural gas from Alaska to Asian buyers are relatively straightforward. About 800 miles via pipeline from the North Slope to tidewater somewhere in Cook Inlet or maybe Valdez. Liquefy the gas, load it aboard tankers, then 3,400 miles by sea to Japan. Or a little farther to China. Pretty simple to draw the lines on a map.

The tanker route from Alaska to Japan is half the distance as the route from the Middle East, and it's two-thirds shorter than the distance from proposed liquefied natural gas export terminals on the U.S. Gulf Coast. (It's about the same from Australia as it is Alaska.)

A round-trip from Alaska to Japan would take about 20 days. Longer trips cost a lot of money. LNG charters were running as high as $150,000 a day in the spring, though long-term charters were less.

The relative proximity of Alaska to Asian buyers provides the easy numbers that work in favor of an Alaska project. But competition from other LNG suppliers, construction costs, operating costs and commodity pricing--those are the tough numbers.

Eyeing Japan and China

Alaska once had the Japanese LNG market all to itself. That was 43 years ago, when the liquefaction plant at Nikiski inaugurated the trade for shipping liquefied gas to the Pacific Rim nation. But since then, 16 other countries have gotten into the business of selling gas to Japan. Alaska's share of the market in 2011 was 0.5 percent.

"The country has a fairly balanced portfolio, with no one supplier having a market share greater than roughly 20 percent," according to a U.S. Energy Information Administration analysis of Japan's energy needs. LNG deliveries last year came in from Southeast Asia (Malaysia, Indonesia, Brunei), the Middle East (Qatar, United Arab Emirates, Oman, Yemen), Africa (Algeria, Egypt, Nigeria, Equatorial Guinea), Russia, Australia, Norway, Trinidad and Tobago, Peru and Alaska.

China, another Asian growth market of interest to Alaska LNG proponents, last year accepted deliveries from 11 countries. But unlike Japan, China has significant domestic production and a pipeline option--it took almost as much natural gas via a pipeline from Turkmenistan last year as it did via LNG tanker.

Guy Broggi, senior adviser at the LNG division of Total Gas & Power, part of the French oil and gas major Total, is skeptical that China will be buying as much LNG as some predict. Instead, the nation will load up on less expensive pipeline gas from Turkmenistan, Myanmar, maybe even Russia, Broggi said at an LNG conference in Houston in May.

"China will not be the one to take the highest price," Broggi said.

Another issue for China is that the government sets the...