Japan Eyes Port MacKenzie LNG Facility

Natural gas -hungry Japan is eyeing the short distance between Alaska and Japan as one reason to build an LNG processing plant here. Resources Energy Alaska CEO Mary Anne Pease says the plan for a mid size plant is small, compared with other projects. If constructed, the plant could produce one million tons of LNG a year for shipment overseas. So far, Nikiski’s LNG plant is the only one in Alaska.

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“A one million ton facility is about the same size as the Conoco Phillips plant, and you expand, evenutally, when North Slope gas becomes available.”

Pease, who just returned from an LNG conference in Japan, says that country’s need for cheap energy after the Fukushima disaster creates an opportunity for Alaska producers.

“Timing is so very critical. There are so many projects world wide that are on the horizon, that making sure that that relationship and focus on Alaska is there early on, is critical.”

She says the independent oil and gas producers in Alaska can benefit from the project. Resources Energy won’t wait for North Slope gas. Pease says, the company is eyeing Cook Inlet for supply, although no contracts are in place yet with those producers.

“The one million ton facility requires about one hundred and sixty million cubic feet a day of gas, and that would come from the Cook Inlet. We’ve done a reservoir analysis, and a very robust model that shows that after all the instate demand has been met, there’s still surplus gas of about one hundred and sixty million cubic feet a day for the next twenty to thirty years for export.”

Resources Energy is working with the Houston TX firm, KBR on a technical and feasibility study for the project. Pease says that the cost of the entire project could be between one and two Billion dollars.

Port MacKenzie would be used as a staging area to bring in materials, although Resources Energy would have to build it’s own dock, since federal law does not allow LNG to be shipped from the existing dock.

The proposed plant would be constructed on a mix of private and lease property. Matanuska Susitna borough manager John Moosey says negotiations are underway.

“We think Port MacKenzie would be a perfect spot for them. We’re early into discussions. We have been providing information to them so they can do their due diligence and make the correct decision. We have been working for well over a dozen years for these types of opportunities, and the REI project fits right into our wheel house.”

The LNG plan has to be approved by the federal Department of Energy and the Federal Energy Regulatory Commission before it can move ahead. Although that process is lengthy, Pease says she’s confident that the plant can be operable by 2020.

Funding would be handled by Resources Energy’s parent company in Japan,

“Japanese money will definitely be the bulk of the ownership. They will have the majority share of this project. And they will utilize Japan Bank financing, and that is very low cost financing. Sure we’re going to open the doors to US investors as well, AIDEA as well. That’s what they do. They invest in export projects using Alaska natural resources.”

Resources Energy Alaska and AIDEA already have a cost reimbursement agreement to pay for AIDEA’s work in determining if the project is bankable.

According to Pease, the plant, if constructed, could play a huge part in ensuring Cook Inlet ‘s Renaissance continues

“Why would you continue drilling for gas in the Cook Inlet, if there is no market opportunity. The market drives it ”

Although the Resources Energy project is focused on export, Pease says the company would be quite comfortable in providing LNG “at the gate” for Alaska utilities which want it.