The state entity working towards a natural gas pipeline from the North Slope to Southcentral Alaska says it’s taken an early step towards making the long-planned line a reality.
The Alaska Gasline Development Corp. announced Tuesday it’s signed a deal with a London-based oil and gas firm to supply enough gas to meet demand in Southcentral, and then some. But the project still faces a number of hurdles.
The gas sales precedent agreement, as it’s known, is part of the Alaska Gasline Development Corp.’s renewed effort to build the $44 billion project in stages: first, a pipeline to Southcentral to address a projected shortfall in Cook Inlet gas production — and then, down the road, a liquefied natural gas export terminal to supply markets across the Pacific.
AGDC President Frank Richards says the $10.7 billion in-state line could stave off the worst of a looming natural gas shortage for the Railbelt and even reduce energy prices from their current levels in the longer term.
“This is the first opportunity for a new development for gas supply to be able to meet Alaska’s in-state needs coming from the North Slope, outside of the long-produced natural gas resources in Prudhoe Bay and Point Thompson,” Richards said by phone Tuesday.
Under the agreement, a subsidiary of Pantheon Resources would provide as much as 500 million cubic feet of natural gas per day for the pipeline.
Sen. Bill Wielechowski, D-Anchorage, a longtime supporter of the gasline project, welcomed the news.
“For years, one of the problems that we’ve had with any gas pipeline is getting firm gas sale commitments, and this appears to do that,” he said by phone. “It’s a pretty significant amount of gas to get us started, and I think it’s a very positive development.”
But there’s a long way to go, and some are skeptical, like former federal gasline coordinator and newspaper publisher Larry Persily.
“No one’s putting anything at risk. No one’s spending any money. It’s just another letter,” he said. “The gasline, over the decades, has walls papered with letters like this.”
Persily is skeptical because the agreement is conditional, he said: AGDC will buy the gas if it builds a line and if Pantheon’s project moves forward. And neither of those is a sure thing.
In 2018, AGDC secured similar gas supply commitments from BP and ExxonMobil. But those have long since expired. That’s because the biggest challenge for the gasline hasn’t been supply, but demand.
Until earlier this year, AGDC was targeting export markets. Utilities in Japan and Korea and across the Pacific Rim would finance the pipeline. But those efforts have failed — at least so far.
With its new approach targeting an in-state line first, Richards says AGDC is looking to reduce the risk for export customers who have been reluctant to invest. Instead, Richards says AGDC is looking for commitments from Alaska utilities to buy about 75 billion cubic feet of gas per year, roughly the total gas demand for the entire Railbelt this year.
It’s also looking for an industrial customer in the state to take another 50 billion cubic feet. Richards says AGDC is in “discussions” with utilities and industrial customers, but the developer has yet to announce any firm commitments. And the clock is ticking: Under pressure from lawmakers, AGDC’s board told legislators in April that if it couldn’t find investors for at least the in-state pipeline by the end of this year, the corporation would shut itself down.
“If AGDC fails to secure funding for the entire project or for the initial pipeline phase of the project by that date, we have instructed AGDC staff to initiate the work required to shut down and either sell Alaska LNG project assets or put them into storage,” reads the April 22 letter first reported by the Anchorage Daily News.
The oil and gas prospect that would fuel the newly announced agreement also faces uncertainty, but Pantheon’s chief commercial officer, former Department of Revenue commissioner Pat Galvin, said he’s confident the company will be able to hold up its end of the bargain. Along with gas, the company hopes to produce at least 20,000 barrels of oil per day by the end of 2028 from its Ahpun field, according to Tuesday’s news release.
“The economics of the project look extremely positive, and a project that should be able to advance quite quickly,” Galvin said by phone.
But before the field starts production, it faces a long road ahead filled with stumbling blocks. It’ll require permits from state and federal government — including a lengthy review and an extensive environmental impact statement under the National Environmental Policy Act, Galvin said.
But the project’s location along the Dalton Highway 15 miles south of Deadhorse puts it far from villages, subsistence areas or sensitive habitats, he said.
“At the end of the day, we’re in a much different location than the more recent oil and gas developments on the North Slope,” he said.
Pantheon expects to make a final investment decision by the end of 2027 or early 2028. And if all goes according to plan, AGDC says the agreement could provide gas to Southcentral by 2029.
Eric Stone covers state government, tracking the Alaska Legislature, state policy and its impact on all Alaskans. Reach him at estone@alaskapublic.org.
