Alaska Governor Bill Walker said he has commitments from two of three North Slope producers who are partners with the state in the big Alaska LNG Project not to withdraw from the project without offering gas to potential buyers through the project.
In a briefing Friday, Walker said BP and ConocoPhillips delivered letters making the assurances to him the day before. ExxonMobil, a third partner in Alaska LNG Project, did not send a letter.
Having assurances from two of the three producers is good enough, Walker said Friday. He said he had spoken with senior ExxonMobil officials and that similar assurance from that company would be forthcoming.
The governor was previously worried that an exit from the project by one of the slope producers at a critical time could leave the project stranded without enough assurance of throughput for financing and construction. Costs are estimated at $45 billion to $65 billion.
"Now we know we have gas committed to the project, and this is critical. A piece of pipe without gas is no good," Walker said.
On ExxonMobil, Walker said, "It is still a partner and is continuing to work in good faith [on the Alaska LNG Project]."
In a related development all the partners, including ExxonMobil and the state, voted late Thursday to approve a $230 million 2016 budget to complete preliminary engineering.
The letters from BP and ConocoPhillips were not made public, although the governor said they will eventually be released. Sources familiar with the exchanges said the letters essentially said that good-faith efforts to sell gas will be made by any company withdrawing, and that gas would be sold under "reasonable commercial terms" to any buyer.
STATE COULD BUY GAS FROM WITHDRAWING PARTNER: GOVERNOR
Walker originally pushed for more definitive terms of a potential sale agreement from a withdrawing partner, but later backed away from that. However, in Friday's briefing he said the state itself might be willing to buy gas from a withdrawing partner, then resell it.
"This is one option we're looking at," Walker said.
The state's gas corporation, the Alaska Gasline Development Corp., has the authority to purchase and sell gas, acting as a gas aggregator, through a subsidiary company formed last fall for that purpose. Although AGDC's intent, for now, is to buy and sell gas to Alaska communities, it could also sell LNG in international markets.
Purchasing gas from a withdrawing partner would be a big financial undertaking for the state, on top of the state's current commitment to finance 25% of Alaska LNG Project construction costs that could exceed $50 billion.
A consulting firm advising the state Legislature, enalytica, estimated the cost of purchasing, for example, ConocoPhillips' 22% share of North Slope gas could cost $19.27 billion if the gas were bought at $4/MMBtu.
Alaska owns 25% of the North Slope's known 35 Tcf of gas and owns the same percentage of the Alaska LNG Project after completing the purchase of TransCanada's share of the pipeline and North Slope gas conditioning plant.
