Alaska needs real leadership

The recent announcement by Gov. Sean Parnell of his newfound support for the LNG natural gas pipeline option was not a surprise. This is a guy who has been politically urinating into the wind for at least the last two years.

He has stayed true to Palin’s Alaska Gasline Inducement Act in the face of industry trends that dictated an end to the big pipe south before AGIA was even enacted. Gov. Parnell could not ignore LNG market trends and the impact of domestic U.S. and Canadian shale gas production any longer without looking like the proverbial village idiot.

Even the politicians in the Legislature are getting on the LNG train.

You know something has become so obvious that it cannot be ignored when our legislators begin to mouth platitudes about something that they have ignored since, what, about 1984? The proverbial handwriting was on the wall for all to see, but those in elected office.

Just before Conoco announced the end of the charade that was the Denali natural gas pipeline project, the president of Conoco in Alaska stated that the intent of Conoco all along was to warehouse North Slope natural gas for the foreseeable future. Why would Conoco conceal its intent to do nothing with its North Slope gas? Conoco and Exxon have a 25-year commitment to move LNG from Qatar to the U.S., where there is no longer a market. Asia is now that market.

Qatar represents an investment of $22 billion in U.S. dollars on the part of Exxon and Conoco to upgrade the northern and southern LNG gas trains and production facilities to meet export obligations. The first LNG tanker with Qatar LNG docked at a U.S. LNG import terminal earlier this summer, where the gas was off loaded and then reloaded back onto a LNG tanker, and shipped to a foreign market. The gas was not used in the U.S.

The Wood-Mac Report on the Alaska Gasline Port Authority’s website supports the viability of exporting Alaska natural gas from Valdez. The estimated cost of delivery to an Asian market for Alaska LNG is $10 per million BTUs (mmbtu equals one thousand cubic feet). Cost of natural gas and shipping from the North Slope to Japan via the all-Alaska natural gas pipeline to Valdez is estimated in the Wood-Mac report at $8.50/mmbtu total, delivered. Pipeline transport is estimated at $1.70/mmbtu, with shipping to Asia by LNG tanker estimated at $.59/mmbtu.

The All-Alaska Natural Gas Pipeline project would have a total volume of 2.7 billion cubic feet per with 250 million cubic feet going to Southcentral via a spur line from Glenallen. It is the volume of gas shipped to Valdez that keeps the price of the 250mcf/day to Southcentral low enough that our natural gas prices would not increase. Further, the gas liquids would be kept for use in-state to provide the resources for a new petrochemical industry in the Fairbanks area.

In 2010, the Japanese were paying up to $12/mmbtus for LNG. The highest price paid this year by Japanese LNG customers has been almost $17/mmbtu.

BG Group PLC of Great Britain has made a significant commitment with Cheniere Energy Partners, Sabine Pass, La., to export shale gas as LNG to Asia. BG expects a sale price for the LNG at 115 percent of the Henry Hub price plus a $2.25/mmbtu premium.

Wood-Mac’s projections for a delivered price from Sabine Pass is $10.50/mmbtu, or $2/mmbtu more than delivered Alaska gas. LNG shipping costs to Asia from Louisiana are about four times higher than from Alaska. BG is so bullish on LNG that BG has another LNG export project of its own underway at Lake Charles, La.

Election year is coming up, and the politicians up for election have to fool those idiots that vote once again into believing that they are really gonna do something about Alaska’s economic situation … this time, if only they are reelected. We are supposed to ignore bad decisions and the lack of initiative and indecision since about 1994.

Only the state of Alaska’s leadership seems to be incapable of grasping industry trends. Natural gas export by LNG is viable from the U.S. and is being aggressively pursued by all, but Alaska.

Alaska needs real leadership, not more of the same.

Larry Wood is a 57-year resident of Alaska and businessman who is “Butte trash” since 1961 and proud of it.