Regional LNG: Alaska potential source for LNG plant in Baja California: Report
Wednesday, September 24 2003 - 09:09 AM WIB
The San Diego company is pressing Alaskan officials to act quickly, saying it needs gas supply agreements soon in order to begin construction of the receiving terminal during the first quarter of next year.
The Alaska Natural Gas Development Authority expects to provide a preliminary assessment of a deal to supply gas to Sempra later this week and complete a more detailed review by the end of next week.
Under the Sempra proposal, Alaska would build a pipeline from the North Slope to the port of Valdez, as well as construct a plant to liquefy the gas for transport aboard ships to its planned terminal south of Ensenada in Baja California.
A study in 1985, when Alaska considered a similar proposal, estimated the cost at about $12 billion.
Nonetheless, Harold Heinze, chief executive of Alaska's gas development authority, said his first impression of the Sempra proposal is positive.
Beyond allowing the state to exploit an unused resource, he said, the plan would have the added benefit of bringing gas supplies to Alaska's densest population centers, where it is used to generate electricity and heat homes, he said.
"I believe Sempra has a quality project on the table," said Heinze, who is scrambling to provide a detailed response to a query from Gov. Frank Murkowski on the plan.
Darcel Hulse, president of Sempra Energy LNG Corp., said Alaska is one of many sources under consideration for supplying the planned Baja California receiving
terminal. Other potential sources include Bolivia, Indonesia, Malaysia and Sakhalin Island in Russia.
Hulse said Alaska is significantly closer to the planned terminal in Baja California and would save on shipping costs. He estimated that shipping a million BTUs of gas from Alaska might cost about 35 cents, while transport costs from Bolivia might be about 65 cents. A million BTUs of natural gas now sells for about $4.50.
"Transportation is a significant factor in costs, but it is one of many components," said Hulse.
Heinze said Alaska has an advantage beyond lower transportation costs.
"We are politically stable and contract law applies here," said Heinze.
But completing an agreement with Sempra would require Alaska to secure more gas than it now controls. The state now owns one-eighth of the North Slope's natural gas resources.
The balance of the gas is owned by a trio of major energy companies, which are pressing Congress for price guarantees to build a pipeline from the North Slope
across Canada to the U.S. Midwest.
The price guarantees for the proposed pipeline are contained in an energy bill now before Congress.
Known reserves of North Slope gas are insufficient to satisfy the needs of the proposed pipeline to the Midwest and the Sempra project. But state officials believe additional gas is likely to be discovered that would fully satisfy the demands of both projects, said John Manly, a spokesman for Murkowski.
Without a market for the commodity, North Slope oil drillers now reinject the gas they tap back into the earth. But natural gas prices have spiked this year
to double the levels of recent years, creating added incentives for selling the unused resources in Alaska's North Slope.
Sempra and others argue that conventional sources of natural gas in the Lower 48 states are running short and that LNG shipments can play a role in preventing
future shortages. But the process of liquefying natural gas building specialized tankers, shipping and regasifying the commodity adds costs. Sempra has said gas prices must remain at least $3.50 per million BTUs for LNG to be profitable.
The governor's spokesman, meanwhile, says it may be difficult to respond as quickly as Sempra wants.
"When (Sempra) was in a few weeks ago, they said, 'We need to know in two weeks,' " said Manly. "I don't know how a person makes a decision on that kind of deal in two weeks."(*)