Tough global competition and low natural gas prices have Alaska’s partners in a multibillion-dollar trans-Alaska pipeline preparing to give up — at least for now.
On Thursday, representatives of BP, ConocoPhillips and ExxonMobil told a joint hearing of the Alaska House and Senate resources committees that they aren’t ready to proceed with AKLNG, the $45 billion to $65 billion effort to build a natural gas pipeline from the North Slope to a port on Cook Inlet.
“I’m never going to say it’s dead, but … we have to look at where we are economically,” said Darren Meznarich of ConocoPhillips. “It’s not ready. It’s not economic right now.”
Representatives of ExxonMobil and BP told lawmakers much the same thing: Competition from international natural gas projects and Lower 48 shale gas means Alaska’s pipeline no longer makes economic sense unless the project changes.
“The project that we have been pursuing … struggles to compete in the global marketplace, and we’d need a project that’ll compete,” said David VanTuyl of BP.
The state of Alaska isn’t giving up on the pipeline just yet, however. Over the past year, representatives of the Alaska Gasline Development Corporation have promoted the notion that the state itself could take over total management of the pipeline effort.
In a Wednesday joint hearing, the two Legislative committees heard testimony about ways to finance the pipeline that could make it competitive globally.
The three oil and gas company representatives said Thursday that their organizations would be open to a state takeover, and their companies would be willing to sell gas to the pipeline.
On Thursday, Nikos Tsafos, a consultant hired by the Legislature, said that if the state goes ahead with the project alone, it carries enormous risk.
The state could press ahead and build a pipeline on its own, but Alaskans must understand that is a risk, and Alaskans could end up losing their entire investment in the project as a worst-case scenario.
For the time being, the state and its three partners are wrapping up work on the project’s first stage, which has cost between $500 million and $600 million. In early 2017, they are expected to vote on whether or not to proceed to the project’s next stage, which is expected to cost about $2 billion.
In a statement Thursday, Gov. Bill Walker said he continues to believe that “monetizing Alaska’s vast amount of stranded gas … would be Alaska’s most significant and most immediate financial get-well card, one that will bring generations of benefits to Alaskans.”
He added, however, that a pipeline must be economically viable and will not, “under any circumstance,” be financed by the Alaska Permanent Fund.
“Let me be clear, a project that is not economically viable will not be built. If economically viable, it will be financed by long term purchase contracts secured before the first piece of pipe is laid, not by the Permanent Fund,” Walker said in his statement.
• Contact reporter James Brooks at 523-2258 or james.k.brooks@juneauempire.com.
