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Northern Gas Pipelines is your public service 1-stop-shop for Alaska and Canadian Arctic energy commentary, news, history, projects and people. It is informal and rich with new information, updated daily. Here is the most timely and complete Arctic gas pipeline and northern energy archive available anywhere—used by media, academia, government and industry officials throughout the world. Northern Gas Pipelines may be the oldest Alaska blog; we invite readers to suggest others existing before 2001.  -dh

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LNG

6-25-15 Uphill Road For An Alaska LNG Project

25 June 2015 8:18am

It's An Uphill Road For An Alaska LNG Project

Whether most Alaskans appreciate it or not, the best hope for a successful, Alaska LNG project is that Alaska's largest producers support it.  Today, we analyze why that so.

by

Dave Harbour

Alaskans have consistently supported higher taxes on Alaska's oil companies and higher spending on social services -- with some exceptions.  

The Alaska tax and spend model is not unlike the model employed nationally, in Washington D.C., except national leaders are capable of spending more than they take in by merely printing more money.  

Ultimately, that model taxes the public via inflation rather than directly, diminishing the value of the money as it lowers the value of individual savings and paychecks.  

The beauty of that model is that a future generation pays for the votes attracted by this generation of politicians.

As politicians increase tax levels, their overspending redistributes wealth to some individuals and to supporters able to maintain investments in real estate, land, capital projects and enterprises producing recurring revenue -- investments that benefit from inflation.

It can be and often is an intellectually dishonest, but effective formula for gathering reelection votes from some at the expense of others.  

Logically, that concept is unsustainable.  The concept is unsustainable because more and more taxation must end at some finite point and because ever higher government spending depends on that finite tax revenue.

As the unsustainable economy approaches, liberal lawmakers have historically found it quite tempting to unfairly demonize companies for not, "paying their fair share", and to embarrass fiscally responsible lawmakers for being, "uncaring and insensitive to the needs of...."

As we'll explain, the day of reckoning has now caught up with Alaska.  The state imposes high taxes, is depleting its remaining savings accounts while continuing its spending spree.  (No one can say Alaska's leaders were not warned!)

Background

Alaska's elected leaders tasted an addictive elixir of $900 million in bonus bids from the 1969 Prudhoe Bay Lease Sale.

In 1971 Congress approved the Alaska Native Claims Settlement Act, critical to the approval of a project to transport the immense Prudhoe Bay oil reserve to market. 

Congressional approval of the Trans Alaska Pipeline System (TAPS) in 1973, by the tie breaking vote of Vice President Spiro Agnew, coincided with mid eastern turmoil, including the Arab oil embargo and a later takeover of Iran's monarchy by Islamic extremists, still in power.

So, oil prices remained high, for a time.

Alaska's government spending and tax policies were mostly controlled by democrats and a few liberal republicans during the decades of the seventies and eighties, when the high oil prices magnified the value of high production, around 2 million barrels per day.  

Yes, the former 'pioneering state' had now become addicted to a growth in income and spending phenomenon that is probably unique in the history of American states.  (Other states, because of the blessing of advanced 'fracking technology' are encountering tax and spend challenges, too.)  We believe none have reached the level of tax and spend excesses adopted by Alaska -- though Alaska could serve as a role model for the need to avoid unsustainable tax and spend policies.

When oil prices began to fall in the mid-eighties, many oil field and support industry employees -- and those dependent upon them -- left the state.  However, production was still strong and the state pretty much continued its march toward becoming the most attractive welfare state in the nation.  We are not aware of any significant social program anywhere that is not replicated in Alaska, and, at a high per capita cost.  

From the 80s onward, Alaska has became the highest per capita taxing and spending state and with the highest number of not-for-profit organizations per capita in the U.S., a vast number of which came to depend on government largess -- 90% funded by oil taxes. 

So now, TAPS' North Slope crude oil throughput has diminished by about 3/4, even though companies are working hard to find and produce Arctic oil.  
 
Because of its spending policies, Alaska's government operating budget has become about 90% dependent on TAPS' North Slope throughput.
 
Unlike the 80s when throughput remained high during a low price period, Alaska is now experiencing low TAPS throughput and low prices for that throughput.
 
This double whammy, though it would not have been unexpected by prudent planners, has caused chaos in Alaska's political model that requires ever higher oil revenue for ever higher costs of government.  Unfortunately, such circumstances can lead to a phenomenon known as an, "Economic Death Spiral", wherein higher and higher taxes produce less and less revenue.  While Alaska has not reached that level of hopelessness, the fact that the condition exists is sobering incentive to make the best possible decisions, early enough.
 
The 48" TAPS oil pipeline traces a path from the Arctic, over the mountains of Alaska to the Valdez seaport, some 800 miles.  TAPS was built mostly above ground, and insulated against the cold, so it could move the otherwise viscous oil in a warm-fluid state...even during many sub-zero months.  (In contrast, a gas pipeline would be mostly buried in the cold ground with cold gas flowing through it.)
 
But the day surely approaches -- says the 'prudent planner' within us -- when the warm oil throughput is so little and maintenance costs are so high and winter temperatures are so cold, that production must cease.
 
Who would be the first to suffer?  Not the oil companies.  They would dismantle TAPS, revegetate the right of way and transfer exploration and production budgets to more attractive areas.  
 
Those suffering from a TAPS shutdown would be citizens dependent on programs funded by oil tax and royalty revenue.  Especially vulnerable would be Alaska Native villagers who value 'subsistence' lifestyles, lifestyles which have become tethered to the benefits of oil money: health clinics, schools, airports, ports, SUV's, snow machines, fuel subsidies and myriad social programs.
 
The foregoing demonstrates why Alaskans are so focused on the need to both find and produce more oil...but also to market Alaska's North Slope natural gas reserves.
 
From Oil to Gas
 
For decades Alaskans have lusted over a project that would monetize the huge natural gas reserves on the Alaska North Slope, at least 35 Trillion Cubic Feet (tcf).
 
In other places, we have documented the history of Alaska's gas projects, all of which have failed to prove economically feasible.
 
Today, Alaska's three major producers have committed to creating a feasible gas project but have maintained their position over decades that any multi billion dollar gas pipeline project must have fiscal certainty.
 
In other words, we could not imagine investors putting another 800 miles of pipe in Alaska, along with a tidewater LNG plant, with the risk that the state will then increase taxes on oil and/or gas.  This could dilute the value of the investment--perhaps even to the extent that politicians could render the investment infeasible after investment decisions were made based on current tax statutes.
 
The state Constitution requires that the taxing ability of the state remain unabridged and that no legislature can take action that binds a future legislature.  A Constitutional amendment is likely required in order for elected officials to be able to provide large project investors with appropriate evidence of fiscal certainty.
 
Just as the project led by Alaska's producers (AK-LNG), approaches final sanctioning decisions, the Governor and Legislature are faced with the challenge of obeying the Constitution while meeting the reasonable, fiscal certainty needs of major gas pipeline investors.  And, they must do so as dependent constituents cry out for the government to, "Feed me, feed me".
 
Recently, the Governor of Alaska presented a letter to producers stating his willingness to work on fiscal certainty for the gas project, but not for oil investments.  The letter also named other 'demands'.
 
This is troubling for a number of reasons.  One reason we are troubled, is the reality that the owners of the gas are also the owners of oil.  What's to prevent gas investors from spending $60 billion on an Alaska LNG project only to have a predatory legislature/governor swoop in for an increase of oil taxes?  The result of unpredictable oil tax increases could be equally damaging to a gas pipeline investor's bottom line.  In short, we must suggest to Alaska's governor that fiscal certainty for a gas pipeline investor not applied to that investor's Alaska oil and gas activity is -- in our opinion -- no fiscal certainty at all.
 
Meanwhile, Alaska's gas competes with everyone else's. 
 
Our mid-Atlantic energy analyst friend, who prefers to remain unnamed, warns us today that the LNG market is becoming increasingly competitive.  Many of the three dozen North American LNG projects investors are considering will simply not remain economically feasible for a number of reasons unique to those projects.  
 
How will Alaska fare with its competition when most competing projects have:
  • more moderate climate and terrain
  • more inexpensive logistical costs
  • better proximity to the markets
  • gas reserves closer to LNG tidewater facilities (i.e. no cost for an 800 mile Arctic/Sub Arctic pipeline)
  • lower labor costs
  • lower political risks 

 Conclusion

TODAY, the Vancouver Sun published this report that British Columbia Premier Christy Clark's government is recalling the legislature for a "rare summer session" to pass key legislation enabling a liquefied natural gas project.  
 
This would be BC's version of increased fiscal certainty.
 
Meanwhile, faced with this competition, Alaska continues to spend its depleted savings, allow run-away spending and make rather hostile demands on the oil/gas investors.  At the same time, the Governor and his Revenue Commissioner are hinting that oil tax increases are lurking behind the dark horizon.
 
Alaska's leaders from the Governor to every legislator better start accepting the fact that the large, North Slope oil and gas producers are Alaska's greatest economic friends.  They are the golden goose.  They are the human treasure which provides the money, technology and capability to explore for, produce and monetize Alaska's remotely located resources.  
 
Treating investors with courtesy, fiscal stability and good communication is the best way to both improve throughput of TAPS and entice a gas pipeline/LNG project investment.
 
The second best way to assure that prosperity is for elected leaders to do what they were elected to do: put Alaska's financial house in order.  Make the budget sustainable.  It may not be a pleasant job, but if today's crop of politicians can't do it they should make way for others who can do it.
 
Yes, the great, Alaska North Slope gas monetization project is on an uphill road.  Hazards abound as does competition and internal strife.  Great skill and determination are required to achieve the summit.
 
If Alaska's leaders can just rise to the occasion, summon the required diplomatic, communication and common sense attributes ... and recognize that their very best hope for success is a willing, capable and dedicated group of major producers ... great things can happen for all the participants.  
 
Otherwise, Alaska could find itself overtaken, outmaneuvered and outclassed by other oil and gas jurisdictions that have a greater ability to lead, cooperate, make wise decisions and act.
 
Will Alaskans snatch victory from the jaws of defeat, or will the gas monetization challenge be too great for this generation of leaders?
 
The AK-LNG project's window of opportunity seems still to be open.  For how long, we do not know.  We hope the state's elected leaders can muster the mighty effort required to accommodate the needs of investors to create the new gas project reality that Alaska's economy and citizens so desperately need.
 
 
 
 
 
_______________________________________
 

·        There are many global players trying to enter the market, including over 35 projects seeking ground-breaking in North America

·        Prices of the underlying commodities have slipped dramatically. This includes crude oil (Far Eastern LNG is linked to oil prices), natural gas for LNG, and land-based gas deliveries

·        Japanese nuclear power is re-emerging after being shut down, and China (among others) are seeking more nuclear plants

·        The rate of demand for power appears to be slowing, in keeping with slower global economic growth (see charts below)

A report CITI crossed our desk today, which underlines (and adds to the count of) growing pains being felt by the global LNG market. In particular, this raises serious questions about the ability of LNG exports from the US to have much impact on raising the price structure for domestic natural gas


 

Dave Harbour, publisher of Northern Gas Pipelines, is a former Chairman of the Regulatory Commission of Alaska and a Commissioner Emeritus of the National Association of Regulatory Utility Commissioners (NARUC).  He served as NARUC's official representative to the Interstate Oil & Gas Compact Commission (IOGCC).  Harbour is past Chairman of the Alaska Council on Economic Education, former Chairman of the Anchorage Chamber of Commerce, and past President of the American Bald Eagle Foundation and the Alaska Press Club.  He is Chairman Emeritus of the Alaska Oil & Gas Congress.


Opinions or viewpoints expressed in this webpage or in our email alerts are solely those of the publisher and in no way reflect the opinion(s) of any affiliated company, person, employer or other organization.

 

Categories:

6-16-15 Is Alaska's Governor Seeking Control Of The Ak LNG Project; Or, A Governent Owned Project?

16 June 2015 1:11pm

Alaska Governor Bill Walker's June 8 Letter To AK LNG Participants Doesn't Exactly Radiate Cooperation 

by

Dave Harbour

(In fairness, we wish to provide this comment from an anonymous reader.  -dh)

Bill Walker, AK LNG, Governor, Alaska, 49th State, oil taxes, fiscal certainty, Photo by Dave HarbourToday, we ask if Alaska Governor Bill Walker (NGP Photo) is seeking cooperation with participants in the AK LNG project, or is he seeking to control those free market participants, or is he angling toward a separate, government owned project?  

Here is a letter Walker sent yesterday to House and Senate resource committee leaders which included the copy of a letter he dispatched back on June 8 to producer leaders of the AK LNG project. 

We hate to be judgmental; after all, we all have our own ways of doing business.  And, we should grant the Governor some leeway for lack of experience in dealing in the world of business and free enterprise.

If it were our call, we'd have met with Ak LNG on a regular basis to resolve ongoing issues; after all, there will be plenty more hurdles for participants to cooperatively overcome over the years if the project goes.  

In meeting with participants regularly, we'd have engineered a process like the governor "proposes/unilaterally mandates" in this correspondence, sought concurrence among the parties and made a joint announcement on how the project will proceed.  "Peace to all in an atmosphere of cooperation"....

Instead of a cooperative joint announcement, we now have a Governor presuming to call the shots, dictate the process.

In less formal circumstances, we would likely ask, "who in the blazes does this guy think he is?"

Readers will find one of the dictated matters occurring in the Governor's correspondence, item #3.  In it he acknowledges that one of the big issues to be resolved is "fiscal stability" (See our 4-part series).

Government bullying can turn a reasonably profitable project into a loser.  

The bigger the investment, the more need there is for assurance that property will not be expropriated by fiat, as in the case of Argentina, or more indirectly taken by predatory taxation occurring after investments have been made.  

Just think about this: if an investment goes south on a manufacturing plant or commercial fishing boat, there are often plenty of potential buyers.  But when you bury a pipeline into the earth and the investment goes south, statutes require you spend billions more dismantling and removing the asset, and restoring the right of way.

In our opinion, the AK LNG investors have no choice but to seek full fiscal certainty on all of their oil and gas assets in return for the big gas transportation system investment.

If the Governor wishes not to use his bully pulpit supporting that need with the Legislature and the citizenry, we think it obvious that he either does not believe that full fiscal certainty is needed or he holds back on offering fiscal certainty knowing participants will have a difficult time justifying the investment.

This does not mean "fiscal stability" of the oil companies.  It means, basically, that if the investors pour $45-$60 billion into the state of Alaska to build a gas pipeline/LNG project, they need to know that they will not be treated here like Repsol was treated in Argentina less than a decade ago.

Alaska has demonstrated in the past that in the 49th state, "A Deal Is Not Necessarily A Deal".  Readers can explore the link for background.  Basically, Alaska's elected officials have taught investors that they don't mind raising taxes after an investment decision is made and they don't mind doing it RETROACTIVELY.

Being hopeful, but not stupid, Alaska's oil industry has said for a generation that when and if a gas transportation project is built, the state will have to guarantee fiscal stability of the project.

In the June 8 letter, Walker, agrees that fiscal stability should be part of the process, but that it will exclude oil.

In other words, he is saying, "I'll agree to not tax gas after the investment is made but you'll get no guarantee from me regarding the oil."

So if one is trusting enough in Alaska's state government to invest scores of billions in a gas pipeline, one is not concerned that oil taxes will be raised after the gas project is built?

We have talked to no one about this correspondence, either in the Administration, Legislature or oil industry.  If we had, we'd have undoubtedly been smarter.

But we are compelled based on an independent reading of the correspondence to conclude that the Governor thinks he can charm or coerce industry into investing billions into a gas transportation project by providing only half a loaf of fiscal stability.  Either that, or he is trying to infiltrate so many skunks into the gasline parade that any rational investor would say, "Sorry, not today".  By multiple skunks, I refer to but do not have space to explore other troubling provisions of the correspondence, including gas marketing, government ownership and pipe routing issues.  

If you are an investor hoping for a cooperative government partner, read the June 8 letter and weep.

The June 8 letter, causes one to wonder if the Governor -- a lawyer who spent a undistinguished, quixotic career advocating a government owned LNG project -- will finally get his wish to be Master and Commander of some imagined, but not yet real, government-owned, Alaska LNG project.

We hope this is not Walker's motivation for the June 8 letter, nor his pipe dream.

If it were, we fear that to the innocent citizens of Alaska the dream will morph into a pipemare.

-30-

 

See reader comments below with my responses in red....

If I were an alien drop kicked to this planet; my main takeaway of a cursory reading through is that the author implicitly dislikes the Governor. I am unable to discern the GOA's motives.  I do not dislike the governor and am as 'charmed' by him as the next citizen; but my role here is to draw logical conclusions from actions.  If that discipline is judged to be personal or subjective, so be it.
 
Is he trying to dictate the process, or is this type of simpleton action an honest outworking of his character; further evidence of an acute lack of understanding/experience in matters of import.
 
By being public, should his motive be to blow up the JV, it may grant a certain cover for future unilateral actions by the administration undoubtedly. But as to his motive, I cannot speak. 
 
As to the point of oil tax stability vs. a single specific large scale activity and tax implications; I don't think it is appropriate to expect similar treatment. For the SOA to execute an agreement on fiscal terms for a specific project over a specific time period would be a difference of kind rather than degree in relation to oil taxation.  Nevertheless, stability for an oil and gas producer's gas and not his oil is no stability at all.
 
As a sovereign we do not execute contracts on projects or with companies, we have a broad base tax system and the premise that it would remain unchanged over a period of decades is untenable. Alaska better question its premises if it wants a gas project, particularly with the competition it faces and with its unreliable, predatory tax history.  Current activity in the oil patch is resplendent with renegotiations due to a changing market dynamic, but those center around specific contracts i.e. shipments of LNG pricing being renegotiated due to market conditions in the same manner service companies have renegotiated to maintain a position with producer companies. In fact, Apache reports their earnings are now greater at $60 bbl than previously under $90 bbl pricing. Both they and their service providers are profiting.   Perhaps Alaska should re-explore the idea of a Constitutional amendment to permit a fiscal stability 'contract' under certain conditions.
 
Ideally, the SOA would develop a taxing scheme that would be appropriate and applicable over wide market dynamic, lasting for decades; that would be a challenge, but perhaps ELF was a good example. When Frank gained office, pundits claimed that ELF was broken. I would posit it as being outdated under the conditions at that time. Even oil companies expected changes to be made. 
 

 

 


(Note: Editors are welcome to reprint our opinion pieces; attribution should occur and we would appreciate being sent a link.  Readers may send any thoughtfully written responses to this address and we will reprint them alongside this editorial for the Archives.)

Dave Harbour, publisher of Northern Gas Pipelines, is a former Chairman of the Regulatory Commission of Alaska and a Commissioner Emeritus of the National Association of Regulatory Utility Commissioners (NARUC).  He served as NARUC's official representative to the Interstate Oil & Gas Compact Commission (IOGCC).  Harbour is past Chairman of the Alaska Council on Economic Education, former Chairman of the Anchorage Chamber of Commerce, and past President of the American Bald Eagle Foundation and the Alaska Press Club.  He is Chairman Emeritus of the Alaska Oil & Gas Congress.


Opinions or viewpoints expressed in this webpage or in our email alerts are solely those of the publisher and in no way reflect the opinion(s) of any affiliated company, person, employer or other organization.

 

Categories:

6-12-15

12 June 2015 12:17pm

KTVA VIDEO.  Alaska is on track to build the largest natural gas project in the world, according to the Alaska Gasline Development board.

They say the U.S. Department of Energy’s license approval is big news — it means Alaska will be allowed to sell its liquefied natural gas (LNG) to any country in the world. Before, only countries on the United States’ free trade list were allowed. It will open the market into Asia, where countries like Japan are in desperate need of LNG.

“Getting that, I can’t say enough, it’s a huge step in the process to get the LNG,” said Dave Cruz with AGDC.

Categories:

5-28-15 Murkowski Cheers LNG Export Approval ... Urges Repeal of Oil Export Ban

28 May 2015 8:43am

Comment: We remind our Canadian and U.S. readers that with so much North American oil and gas existing and potential production and with so many more LNG export projects than the market can accommodate, any major news such as the Alaska LNG export approval today affects investors, jobs, treasuries and economies in both countries.  -dh


US SENATOR LISA MURKOWSKI, Approve Alaska LNG Exports, Approve Repeal of Oil Export Ban, Photo by Dave HarbourBREAKING NEWS TODAY!  U.S. Sen. Lisa Murkowski, R-Alaska, today cheered the Department of Energy’s approval of a liquefied natural gas (LNG) export license for Alaska’s massive North Slope natural gas resources.  READ ENTIRE STATEMENT HERE.... 


Robert Dillon, Senate Energy and Natural Resources Committee, lift crude oil export ban, Lisa Murkowski, Photo by Dave HarbourOur friend, Robert Dillon (NGP Photo), of Senator Lisa Murkowski's Energy and Natural Resources Committee writes this morning of the article below: "From this morning’s edition of The Hill: “Ending the export ban creates a global market for U.S. oil that will increase production and stabilize prices. The U.S. once dominated the energy markets, with the right policies it can do so again.” 

The Hill by Dr. Merrill Matthews.  Sens. Lisa Murkowski (R-Alaska) and Heidi Heitkamp (D-N.D.), along with 10 other Senate cosponsors, have introduced the Energy Supply Distribution Act (S. 1312), whose primary purpose is to end the 40-year ban on exporting U.S. crude oil.

Congress passed a crude oil export ban in 1975 as an understandable, if ineffective, response to the Organization of the Petroleum Exporting Countries’ efforts to use access to crude oil as a political weapon.

OPEC’s decision to cut back oil production left the U.S. with higher gas prices and often long gas lines.  For one of the first times Americans felt the helplessness that comes when foreign countries had us at their mercy.

U.S. oil production had already been declining, having reached its peak in 1970 with an average of 9,637 million barrels of oil per day, according to the U.S. Energy Information Administration.  By 1975 production had declined by 1.3 million barrels a day.  (Read entire article here....)                                          


Washington, D.C.

U.S. Sen. Lisa Murkowski, R-Alaska, today cheered the Department of Energy’s approval of a liquefied natural gas (LNG) export license for Alaska’s massive North Slope natural gas resources. 

“Receiving the conditional license to export LNG to non-free trade agreement countries is a major milestone for the Alaska LNG project and great news for Alaska,” Murkowski said. “With federal permission in place, those working on the project have the ability to begin selling Alaska gas in the Asian markets. With this project comes good jobs and a stronger economy and I’m excited to see Alaska at the forefront of LNG exports.”

Department of Energy (DOE) officials announced the license approval Thursday morning in Anchorage at a roundtable on the federal permitting process hosted by Murkowski.

The license, which would allow exports of up to 2.55 billion cubic feet of natural gas a day for 30 years, is conditional on final regulatory approval of the project by the Federal Energy Regulatory Commission (FERC). The Alaska LNG Project is currently in the pre-filing process at FERC.

The Alaska LNG Project is a partnership between the state of Alaska, the Alaska Gasline Development Corp., BP, ConocoPhillips, ExxonMobil, and the pipeline company TransCanada.

Murkowski noted that DOE’s 30-year authorization – a full decade longer than typical – was justified by the size and scope of the Alaska LNG Project, which could cost as much as $60 billion.

“The volume of 2.55 BCF a day and the length of this authorization are necessary to support a project of this size and scope,” Murkowski said.

Alaska has 35 trillion cubic feet of proven gas reserves on the North Slope, and the potential for 200 trillion cubic feet more both onshore and offshore of Alaska’s northern coast. Alaska also has a 44-year history of shipping LNG from Cook Inlet to Asia from Nikiski.

“I have always indicated that coordination at the federal level will be key to the success of an Alaska LNG project. When the prospects for Alaska gas changed from an overland pipeline to an LNG project, the federal tools changed.” Murkowski said. “FERC has the ability to be the lead agency for permitting and play a coordinating role for federal agencies. Further, the Department of the Interior leads an interagency working group established through executive order to support major Alaska projects and can supplement FERC’s lead on an Alaska LNG Project.”

As chairman of the Senate Energy and Natural Resources Committee and the Senate Interior and Environmental Appropriations Subcommittee, Murkowski has oversight authority over the federal agencies involved in permitting an export project, including DOE and FERC, and is well positioned to ensure the project continues to advance.

 

 

Categories:

5-27-15 Meetings For Our Readers

27 May 2015 5:33am

Larry Persily, gas pipeline route, Kenai Peninsula Borough, Photo by Dave HarbourAlaska LNG Reviews Pipeline Route With Government Agencies, by Larry Persily (NGP Photo) on behalf of the Kenai Peninsula Borough


 

Petroleum News: Canada's Mackenzie Gas Project Still Breathing!


 

Chuck Becker, Alaska's Diplomat, Energy Advocate, World Affairs Coucil, Alaska Support Industry Alliance, Photo by Dave HarbourToday: funeral services for our longtime friend, energy advocate and "Alaska's Diplomat", Chuck Becker (NGP Photo).

Tomorrow: the big LNG meeting in Anchorage, open to media and the public.

Next Week

The U.S. Energy Information Administration (EIA) will hold its 2015 EIA Energy Conference on June 15 and 16 at the Renaissance Downtown Hotel in Washington, DC. The EIA Energy Conference has become a premier forum for addressing energy issues in the United States and worldwide. This event provides a unique opportunity to meet and network with fellow energy experts and decision makers.

Last year more than 900 thought leaders from industry, government, and academia attended the 2014 EIA Energy Conference. Participants discussed current and future challenges facing domestic and international energy markets and policymakers.

In the coming months, EIA will post additional information regarding the 2015 EIA Energy Conference, including confirmed keynote speakers, topic session participants, and a complete conference schedule. To be added to the mailing list to receive conference updates and additional information, email EIA at conference@eia.gov or follow EIA on Facebook and Twitter.

Keynote speakers include:

U.S. Secretary of Energy

 

Secretary of Energy
Mexico

 

Chairman and Chief Executive Officer
Continental Resources

Executive Chairman
BNSF Railway Company

 

Co-Founder & CTO
Tesla Motors

 

United States Senator 
North Dakota

Session topics include:

  • Effects of changing world oil prices: production, economy, and geopolitics
  • North American energy markets
  • The role of emerging energy storage technologies in electricity markets
  • Natural gas: domestic and global markets
  • Greenhouse gas emissions: power and methane
  • Developments in hydrocarbon gas liquids markets
  • Electric distribution markets in the 21st century
  • Energy by rail and water
  • Energy infrastructure needs and options
  • Residential and commercial energy consumption

Mackenzie Gas Project still breathing - 05/24/2015  In danger of becoming the answer to a trivia question, Canada's Mackenzie Gas Project is not yet ready to fade into history. Since gaining Canadian government approval four years ago, along with obtaining a National Energy Board Certificate of Convenience and Necessity, the Arctic gas venture has re....


Alaska LNG Reviews Pipeline Route With Government Agencies
By Larry Persily lpersily@kpb.us
May 26, 2015
 
(This update, provided by the Kenai Peninsula Borough mayor’s office, is part of an ongoing effort to help keep the public informed about the Alaska LNG project.)
 
Alaska is vast, with a lot of open ground, but it seems like transportation projects in the state — be it roads, railroads or pipelines — can’t help but cross over or under each other while traversing the same natural corridors.
 
Preliminary plans for the proposed 800-mile North Slope natural gas pipeline south to Cook Inlet show it would cross the trans-Alaska oil pipeline 12 times, the Dalton Highway 22 times, the Parks Highway 12 times, Alaska Railroad tracks four times, and the Elliott and Kenai Spur highways one time each.
 
And don’t forget the natural transportation routes. The line would cross the Nenana River in four locations. Just once for the Yukon River. All told, the mid-May 2015 version of the proposed pipeline route includes 446 waterbody crossings. Some are rivers, some creeks, some smaller than that. Some are much larger, such as almost 30 miles across Cook Inlet.
 
More than two dozen Alaska LNG team members and contractors met with 60 federal, state and municipal agency personnel May 12 in Anchorage to discuss the project’s latest revisions to the proposed natural gas pipeline route from the North Slope to Nikiski on the Kenai Peninsula.
 
PROJECT TEAMS ADJUST PIPELINE ROUTE
 
The project teams reported they have made multiple adjustments to the pipeline route since filing the first draft route with the Federal Energy Regulatory Commission in February 2015. It’s all about finding the best path for the pipeline to move North Slope gas 800 miles across the state to reach the liquefaction plant in Nikiski. The project is in undergoing engineering and design, working toward a late-summer 2016 FERC application. The federal agency regulates LNG plant construction and operations, and will prepare the project’s environmental impact statement.
 
While seeking feedback from government regulatory agencies at the all-day session May 12, the Alaska LNG team listed the optimal engineering criteria for pipeline route selection: stable ground, good drainage, and flat or gentle slopes. “We try to stay on the high ground every place we can,” a team leader said. All the while, the team is aiming for the shortest distance between two points while avoiding — as much as possible — fault lines, wetlands, frost-heave soils, power lines, fiber optic cables, visual impacts, cultural sites and private land.
 
The pipeline execution team reported they would like to keep the 42-inch-diameter, high-pressure gas line at least 200 feet away from the trans-Alaska oil pipeline, particularly to allow gas line construction equipment to maneuver a safe distance from the aboveground oil line. But some pinch points will require closer spacing.
 
“In many cases, the oil line (built in the mid-1970s) picked the best spot, and we have to pick the next best spot,” a team member said. The challenge is to find the preferred route within the constraints of geology, terrain and environmental considerations.
 
Several stretches along the route are still under review, with project teams working to find the best way to manage geological, environmental and historic preservation issues.
 
FINDING THE BEST CROSSING POINT
 
One example is the effort to find the best place to cross from the west to the east side of the Nenana River in the area where the Parks Highway, Alaska Railroad and a steep canyon all come together, about 120 highway miles south of Fairbanks near the entrance to Denali National Park and Preserve. This is near where the Moody Bridge crosses 174 feet above the canyon floor. No surprise, the span also is known as “Windy Bridge.” The Alaska LNG team would prefer to stay away from steep, failing slopes, keep outside of the national park, and run the line east of the tourist commercial area known as “Glitter Gulch.”
 
“We’ve got some additional work to do … the answer is still in front of us,” a team member said at the routing workshop. While at the same time working to minimize impacts on highway traffic during construction, especially during the busy summer season, and preserving the scenic views along the highway and at viewpoints that are so important to visitors — and Alaskans.
 
The Alaska LNG pipeline execution team is working with their counterparts at the Alaska Gasline Development Corp. during the route selection, sharing information in an effort to avoid duplication of efforts as the two projects look for the best way past problem areas. The state corporation is designing a smaller-volume pipeline project as a backup for Alaskans to consider if the producer-led Alaska LNG project does not move forward.
 
Alaska LNG teams include staff assigned by all four commercial partners in the effort: North Slope oil and gas producers ExxonMobil, BP and ConocoPhillips, and pipeline partner TransCanada. The state of Alaska would also be an investor in Alaska LNG. 
 
Another area still under review by the pipeline team is Atigun Pass, the highest point on the route at 4,739 feet above sea level in the Brooks Range. The pass is about 175 miles south of the start of the pipeline at the gas treatment plant proposed for Prudhoe Bay. The intent is to thread the gas line over the pass, while keeping a safe distance from the Dalton Highway, the oil line and steep slopes.
 
ABOVE GROUND vs. BELOW GROUND
 
Crossing the Yukon River, about 180 miles south of Atigun Pass, also needs more ground sleuthing, the team reported, particularly geophysical and geotechnical studies to learn every possible detail of ground and subsurface conditions. As of mid-May, the team was assessing the option of directional drilling and pulling the pipe underneath the river, at a point west of the existing oil pipeline bridge and downstream from deep shoreside bluffs. But that could change as the team learns more, and a bridge crossing is an option.
 
Horizontal drilling and pulling pipe also would be used to run the line beneath highway and river crossings along the route, along with possible open cuts and burying the pipe.
 
Although most of the gas line would be buried, several sections of the route would need to be above ground, much like the oil line. Such construction, with the pipeline supported on horizontal steel beams between two vertical columns, would allow the line to span fault lines, staying out of harm’s way.
 
The most serious earthquake risk is the Denali Fault, which crosses the Parks Highway near Cantwell, just 35 miles south of where the gas line crosses the Nenana River near Denali National Park. A 7.9-magnitude earthquake in 2002 tested the oil pipeline, which crosses the fault about 130 miles to the east of the gas line route. The oil pipe survived the quake, thanks to its elevated support structure.
 
Other aboveground stretches for the gas pipeline would include the 60-some miles between the Point Thomson gas field and the gas treatment plant at Prudhoe Bay, where gas from both fields would be cleaned of carbon dioxide and other impurities. The first draft routing submitted to FERC in February indicated the line would be buried in this area, but the team reported at the May 12 workshop that it had decided aboveground construction is a better option to avoid drainage problems of surface and subsurface water flowing north to the Beaufort Sea.
 
Along with Atigun Pass, the Yukon River and Glitter Gulch, another area still under review by the pipeline team is the Deshka River crossing, about 65 miles north of where the line would enter Cook Inlet for its final stretch to Nikiski.
 
Field crews have found multiple cultural sites along the river, with its rich history of subsistence fishing. Historic-use sites along the Deshka are so plentiful the area looks like it “could have been a subdivision,” a pipeline team member said. Alaska LNG is working with its cultural team and the State Historic Preservation Office to find the best river-crossing location.
 
COOK INLET CROSSING
 
Another routing question raised in Alaska LNG’s February filing with FERC is where the pipeline should cross Cook Inlet to reach Nikiski. For now, the project is focusing on what it calls the western route, running the pipeline on the west side of Cook Inlet until Milepost 764 from Prudhoe Bay, then going underwater for almost 29 miles, coming up on the east side of the inlet just 7 miles or so to the liquefaction plant site in Nikiski’s industrial area.
 
On its west side approach, the line would stay away from the Beluga power plant, ENSTAR natural gas line, and drilling pads and access roads. A barge landing would be built on the west side to bring in equipment and supplies, just as a barge landing would be built on the east side for the same purpose — including delivery of the huge modules that would become the liquefaction plant.
 
On the west side, the team is looking at a couple of sites about a mile apart for the pipeline to enter the water, considering shoreline terrain and how far the buried pipe would have to run before reaching water deep enough (30-foot depth) for pipe-laying barge access.
 
For landfall on the east side of Cook Inlet, the line would likely come up at a location called Boulder Point, though the team is also looking at another spot just a couple of miles farther up the Kenai Peninsula coast (near Seneva Lake) with lower bluffs at tidewater. Just as with the west side location, the shortest distance to deep water is a consideration.
 
An alternate path across Cook Inlet, called the eastern route, is not now under active review, team members said at the May 12 meeting. That route would have the pipeline veer east after the Deshka River, cross the Susitna River and come to Port MacKenzie across the inlet from Anchorage. From there, the line would run through Upper Cook Inlet to the Kenai Peninsula, several miles northeast of the preferred crossing route.
 
Onshore problems with the eastern route, team members told regulatory agencies, include crossing through an old artillery range with unexploded ordinance and proximity to power lines and tower guy wires. Offshore, the concerns are numerous: submarine cables in the pipeline’s path; sharp turns in the route needed to avoid the dredged channel for Anchorage port traffic; critical feeding habitat of endangered beluga whales; and scouring along the seabed that could undermine the pipeline.
 
In gathering data for the Cook Inlet crossing, the project teams have learned a lot about the currents and siltation, and will be surveying for obstacles and mapping the seabed this summer as route-selection work continues.
 
The teams reported May 12 that currents along the preferred crossing route run 6 knots at the surface and 4 knots on the bottom. Water depth along the route would be 140 feet at the deepest point; generally about half that for most of the route.
 
To cross Cook Inlet, the pipeline would be lowered from barges to the sea floor. Each heavily concrete-coated section of 40-foot-long, 42-inch-diameter pipeline would weigh 33 tons — the pipeline’s weight would keep it in place on the bottom.
 
SUMMER 2015 FIELD WORK
 
Alaska LNG contractors have a busy 2015 summer field season planned of soils testing, borehole drilling, stream surveys, wetlands mapping, geophysical work, cultural resource surveys and other data gathering as the project works toward submitting its next round of draft environmental reports to FERC in the first quarter of 2016.
 
The summer work will include “ground truthing” data obtained by LiDAR (Light Detection and Ranging), which maps out surface data and details with an airborne laser. Teams will walk the ground to verify LiDAR data at more than 100 sites along the pipeline route, particularly looking at slope stability and geophysical hazards.
 
Additional Alaska LNG workshops for government agencies are planned for June, August and September to cover in more detail route selections and construction methods for waterbody crossings, wetlands and Cook Inlet, along with the dredging that would be required to bring in construction barges.
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5-18-15 New EIA INTERNATIONAL Portal; LNG Links Courtesy of Larry Persily

18 May 2015 7:30am

EIA launches redesigned International Energy Portal

Today, the U.S. Energy Information Administration (EIA) launched a redesigned International Energy Portal to improve access to international energy data and trends in global energy markets.

"With most of the future growth in energy consumption expected to occur outside of the United States and with increasingly interconnected world energy markets, a clear perspective on the international energy landscape is critically important, and EIA's redesigned International Energy Portal makes it easier to gain insight into global energy developments," said EIA Administrator Adam Sieminski.

From our Energy Information Agency mail TODAY: 


Earlier we commented that the 'Usefull Idiots' motivated by idealism are used by manipulators desiring power would use any means to attain their end.  Here is TODAY'S Seattle Times report of how the illegal protesters are violating laws and trespassing.  We await word of who funds and organizes the Seattle community of organizers, most of whom slink under the "broad tent" of democrats though in similar organized protests like "occupy" they have more specifically identified themselves as anarchists, liberals, socialists, communists, community activists, etc.

Is a major manipulator and funder of the Ferguson riots, George Soros, also behind Seattle?  We'll undoubtedly find out as the dust settles. 

-dh


LNG Links Courtesy of Larry Persily:

Larry Persily, LNG, Alaska, Federal Coordinator, ADN, DOR, Photo by Dave Harbour

First Nation rejection forces Petronas to find Plan B for LNG terminal
 
(Globe and Mail; Canada; May 13) - Pacific NorthWest LNG is scrambling to come up with a Plan B after the Lax Kw’alaams First Nation soundly rejected the Malaysian-led project’s $1 billion offer aimed at securing support for a liquefied natural gas terminal proposed near Prince Rupert, B.C. The company said project leader Petronas and its five Asian partners are willing to make changes. A key option is to relocate a planned suspension bridge and trestle the First Nation said was too close to the environmentally sensitive salmon habitat in Flora Bank, part of the Lax Kw’alaams’ traditional territory.
 
“It’s about doing the right thing,” Pacific NorthWest LNG president Michael Culbert said May 13. The overwhelming opposition by Lax Kw’alaams members in three rounds of voting illustrates the many hurdles — from aboriginal criticisms to environmental concerns — that even the most prominent project among 19 LNG proposals in British Columbia must clear before becoming reality. The lure of the money, which would have been spread over 40 years, was not enough to overcome the Native group’s concerns.
 
One possible change for Pacific NorthWest is to move the planned suspension bridge and trestle farther away from Flora Bank. The bridge would support pipelines moving LNG from the onshore plant to a deep-water berthing site for carriers to load up. While the Petronas-led group’s defeat does not sound the death knell for B.C.’s fledgling LNG industry, it is a warning that aboriginal people will vigorously defend their traditional territory against projects that they believe would place fish stocks at risk.
 
 
 
First Nation chief says environmental protection must be guaranteed
 
(Globe and Mail; Canada; May 17) – An aboriginal leader in British Columbia said First Nations will continue to oppose oil and gas developments even if it means rejecting billion-dollar pay-outs — until environmental protections are guaranteed. Setting a high — if not impossible — bar for corporations such as Pacific NorthWest LNG, which is trying to move ahead with a liquefied natural gas terminal, Grand Chief Stewart Phillip said a community vote to reject the development was a clear sign that both business and government must reject their “gold rush mentality” for a more sustainable approach.
 
“Our elders remind us that money is like so much dust that is quickly blown away in the wind,” said Chief Phillip, “but the land is forever.” Last week, the Lax Kw’alaams First Nation members overwhelmingly rejected an offer of more than $1 billion in cash, plus more than $100 million in Crown land, in exchange for supporting the Pacific NorthWest LNG terminal near Prince Rupert. The First Nation contends the project would endanger the habitat of juvenile salmon in Flora Bank, which falls in their traditional territory.
 
“The traditional way of life of the Lax Kw’alaams people and, most importantly, the delicate marine ecosystem that upholds and has upheld their culture for thousands of years, is not for sale,” the chief said. First Nations are also speaking, he said, for “British Columbians who are not willing to accept any unnecessary risks for the interests of transnational corporations and their profits.”
 
 
 
Delays will keep Australia LNG off the market, says Wood Mackenzie
 
(Wood Mackenzie; May 14) - The first cargo from the world's inaugural coal-seam gas-to-LNG train was delivered at Queensland Curtis LNG in January 2015 and much more capacity is under construction around Australia, but delays in several liquefied natural gas export projects in the country will mean that 11 million metric tons less LNG than expected (about 520 billion cubic feet of gas) will be produced between 2015 and 2019, according to global energy consultancy Wood Mackenzie.
 
The coal-seam gas projects in particular will soon be tested, Wood Mackenzie said, and of particular concern is how each operator will ramp up a significant volume of gas in a very short time. “The most productive wells will supply the first train of each project, but risk remains around the deliverability and consistency of the following supply tiers that will feed the second trains.”
 
BG has managed the first train at its Queensland project well so far but a key uncertainty is the speed and consistency of the ramp-up of the gas supply to the second liquefaction train, Wood Mackenzie said. “About 1,000 wells will need to be drilled each year to maintain momentum, but the ability of operators to manage this activity as well as operate an LNG plant has not yet been tried.”
 
 
 
Australia’s Woodside signs up to buy LNG from Corpus Christi plant
 
(The Australian Business Review; May 14) - Woodside Petroleum will proceed with a 20-year deal to purchase 850,000 metric tons a year of liquefied natural gas (about 40 billion cubic feet of gas) from Corpus Christi Liquefaction, a subsidiary of Cheniere Energy. The deal was first announced last year, but was dependent on a series of conditions including construction of two production units at the Corpus Christi project in Texas. Cheniere has given the go-ahead to start construction of the first unit.
 
The plant is planned to include up to three LNG trains and produce 13.5 million tons of LNG annually. Despite a sharp fall in oil prices since the deal was first flagged in mid-2014, Woodside said there are no changes to the terms outlined at that time. Woodside will pay Cheniere 115 percent of the monthly Henry Hub price for gas acquired to fulfill its contract (the 15 percent add-on is to cover gas used in the liquefaction process), plus $3.50 per million Btu for liquefaction, storage and loading. (That equates to $4.35 Australian at May 15 exchange rates). Woodside will handle shipping.
 
The terms are in line with contracts signed by other Corpus Christi customers. The 20-year agreement includes an extension option of up to an additional 10 years and a mechanism that gives Woodside the option to forgo deliveries with sufficient notice, though it would be required to pay Cheniere the $3.50 per million Btu charge even if it doesn’t use its reserved plant capacity. Cheniere expects Corpus Christi to start up its first train in 2018. Cargoes to Woodside from the second train are expected in 2019.
 
 
 
Texas LNG developer denies he was advised against sales to Chinese
 
(Reuters; May 15) - The head of Freeport LNG said May 15 that the U.S. Department of Energy had not advised against inviting Chinese investment in the company's export plant under development in Texas, a contradiction of claims that he made a day earlier. Michael Smith, CEO of privately owned Freeport LNG, which plans to open its Texas plant in 2018, said he misspoke May 14 in an interview with Reuters when he said the department had warned against Chinese investment for political reasons.
 
The department "in no way" advised Freeport LNG on what customers, or sources of foreign investment, it should choose, Smith said. "I regret having inaccurately described the DOE as having advised us as such," he said. Smith said May 14 the advice had lead him to turn down Chinese buyers of LNG. "We were advised by the DOE to be careful who our customers were, because this is very political," he said then, calling the prospect of Chinese interest in a major U.S. export project "a political hot potato.”
 
Smith was not available for further comment May 15. A department spokeswoman said May 15 it did not advise Freeport against sending LNG to Chinese customers or inviting Chinese investment. Customers from across the world have signed up to buy future shipments of U.S. LNG. However, despite growing gas demand in China, no Chinese companies have signed up for U.S. exports directly. Some cargoes of U.S. LNG could end up on China’s shores, but only through secondary deals.
 
 
 
Spot-market LNG price in Japan averaged $7.60 in April
 
(Reuters; May 14) – Average liquefied natural gas spot prices for buyers in Japan fell to a two-month low in April, trade ministry data showed May 14, in another sign of slack global demand. Spot LNG contracted in April for delivery to Japan averaged $7.60 per million Btu, down from $8 a month earlier, less than half the level of a year ago, the Ministry of Economy, Trade and Industry said.
 
Tokyo started surveying spot LNG prices in March 2014 to add transparency to the market amid concerns over rising fuel costs in the wake of the shutdown of nuclear plants in 2011. The average spot price is calculated on about 10 percent of the nation's LNG purchases. The trade ministry survey looks at samples of fixed prices for LNG sold to power companies and utilities among others, and excludes spot deals linked to benchmark prices such as the U.S. natural gas Henry Hub index.
 
 
 
Texas LNG hopeful contracts for FEED work
 
(Houston Chronicle; May 16) - Even though the first federal permitting request was just submitted in late March, NextDecade is already moving forward with early contracts to build its $8 billion Rio Grande LNG export project in Brownsville, Texas, near the Mexico border. NextDecade has contracted with CB&I (formerly Chicago Bridge & Iron) for the front-end engineering and design and to determine the project’s engineering, procurement and construction terms. The terms of the deal are not being released.
 
NextDecade’s Rio Grande liquefied natural gas project includes building as many as six liquefaction trains and two marine jetties. NextDecade also would build a 130-mile pipeline from Brownsville to a pipeline hub near Corpus Christi. Shaun Davison, NextDecade project director for North America, said the front-end engineering and design is conducted in part to provide the Federal Energy Regulatory Commission with “extremely detailed” project plans.
 
The FEED work goes in conjunction with NextDecade entering the pre-filing process with FERC in March, he said. The goal is to submit the draft plan to FERC in October and then submit the final report and plans in January 2016, he said. The venture is being primarily sponsored thus far by Jamie Dinan-founded York Capital Management. Other financing is in the works, but NextDecade executives are remaining mum for now.
 
 
 
U.S. will likely need to review gas exported through Canada, Mexico
 
(Platts; May 13) – U.S. gas exports to North American Free-Trade Act countries Canada and Mexico intended for commercial re-export as liquefied natural gas to countries that lack a free-trade agreement with the United States will likely require approval from the U.S. Department of Energy, a department official said. Deputy Assistant Secretary Paula Gant of the Office of Oil and Natural Gas spoke at an LNG conference May 12 in Austin, Texas.
 
Responding to questions from a panel moderator, Gant declined to elaborate, citing the agency's policy on public comments regarding commercial applications for U.S. gas exports that are under review. Gant's comments bear directly on several LNG export projects currently under consideration for Eastern Canada and Mexico’s Baja Peninsula. The export terminals would likely rely on U.S. natural gas delivered by pipeline across the border to feed the LNG plants.
 
 
 
Japanese shipyard will build LNG carriers to serve Louisiana project
 
(TradeArabia News Service; May 14) - Mitsubishi Heavy Industries has won an order for two next-generation liquefied natural gas carriers to be built in a Japanese shipyard for delivery to Nippon Yusen Kabushiki Kaisha (NYK Line). The vessels are scheduled for completion and delivery in 2018. They will be put into service for transporting LNG from Sempra Energy’s Cameron LNG project under construction in Hackberry, La. Mitsubishi Corp. is a partner in the Cameron project, as is NYK.
 
The carriers on order feature a new design of a dual-fuel (diesel or natural gas) engine that will power a steam turbine to drive an electric propulsion motor, also capturing and utilizing waste heat in the power system. The vessels will measure almost 965 feet long, 160 wide, with a draft of 36 feet. Each will be capable of carrying almost 3.5 billion cubic feet of gas as LNG. The new ships will be capable of passing through the expanded Panama Canal that is expected to open for traffic early in 2016.
 
 
 
Anadarko selects engineering contractors for Mozambique LNG
 
(Bloomberg; May 17) - Anadarko Petroleum has selected a group of engineering contractors including Chicago Bridge & Iron for a potential $15 billion liquefied natural gas project in Mozambique. CBI’s joint venture with Japan’s Chiyoda and Italy’s Saipem will work on the onshore project that includes two liquefaction trains with 6 million metric tons of annual capacity each, Anadarko said May 17. The decision is a significant step toward reaching a final investment decision, Anadarko CEO Al Walker said.
 
Anadarko said it will make a final investment decision by the end of 2015. Construction plans also include LNG storage tanks, condensate storage, a multi-berth marine jetty and associated utilities and infrastructure. The company has secured non-binding long-term off-take agreements for more than 8 million tons a year of LNG from potential customers and is making progress in turning these into binding sales-and-purchase deals, Walker said. It’s also getting letters of intent from lenders for project financing.
 
Anadarko will work on a development plan to submit to the government in the coming months, Walker said. As much as 75 trillion cubic feet of gas may lie in the Area 1 prospect off Mozambique’s shores, according to Anadarko and its partners developing the discovery. Anadarko and Eni are operators in Areas 1 and 4 of Mozambique’s Rovuma Basin, home of the world’s largest gas find of the past decade.
 
 
 
India offers power generators subsidy to use more LNG
 
(The Financial Express; India; May 13) - The lowest subsidy requested by India’s power generators to use more imported liquefied natural gas in their power plants was about 3 cents per kilowatt hour. A government auction ended May 13 to determine the subsidy required to entice generators to use more LNG and help ease electricity shortages. Eight power generators bid in the tender, representing almost 4,900 megawatts of generation capacity that is running far below capacity because of domestic gas scarcity.
 
According to a senior Power Ministry official, this round of bidding was for more than 300 million cubic feet of gas per day that would be needed to fuel the stranded gas-fired plants during June-September this year. Overall, 31 power stations in India with a combined capacity of 14,305 megawatts are languishing because of a lack of gas.
 
Power companies seeking the least financial support to reach an electricity tariff of about 8.5 cents per kilowatt hour won the auction. The government also is asking LNG importers and transporters to reduce their marketing and operational costs.
 
 
 
India may look to renegotiate sales price of Qatari LNG contract
 
(Interfax Global Energy; May 15) - India’s largest liquefied natural gas importer could seek to renegotiate the terms of its long-term supply deal with Qatar this year. Petronet LNG’s 25-year, 7.5-million-tons-per-year contract with Qatar’s RasGas has provided the bulk of volumes delivered to India since 2004, and has typically been competitive with alternative fuels and cheaper than spot LNG — but not lately.
 
The free-on-board price for RasGas contract volumes to India was fixed at $2.50 per million Btu from 2004 to 2008, before oil indexation was gradually introduced between 2009 and 2013. Oil indexation of 12.67 percent (meaning a Japan Crude Cocktail price of $100 a barrel would produce an LNG price of $12.67 per million Btu) took effect from the beginning of 2014, with prices peaking at $13.60 toward the end of the year. Since then, the RasGas contract has been slow to reflect the sharp drop in global oil prices.
 
The contract includes a price ceiling and floor based on a 60-month average of oil prices, effectively preventing any significant downward adjustments in the short term to reflect the recent decline in crude oil prices and reducing the competitiveness of Qatari LNG under the contract. Spot LNG prices as low as $7 have reduced India’s appetite for its contract volumes, with a significant decline in demand for Qatari LNG and deferral of at least 10 contracted cargoes from RasGas during the first quarter of this year.
 
 
 
Takeover of BG Group puts Shell in middle of East Africa LNG
 
(Bloomberg; May 12) - Shell’s $70 billion takeover of BG Group will put Europe’s largest energy company in the middle of East Africa’s race to export natural gas and is set to boost the chances of Tanzania becoming a major LNG supplier. Shell’s acquisition would include BG’s stakes in three blocks off the coast that contain one-third of Tanzania’s estimated resource, and may give the East African nation an edge in the race to export liquefied natural gas from the region over neighboring Mozambique.
 
Shell has “strong expertise in working with governments and has also displayed strong appetite for risk, deploying new technologies,” said Dolapo Oni, head of energy research for Ecobank Group. “These attributes could benefit the Tanzania LNG project and give Mozambique much-needed competition for the limited investment dollars available globally for these sort of projects.” Statoil and partner ExxonMobil also have blocks in Tanzania, while Eni and Anadarko plan developments in Mozambique.
 
Producers holding leases in the two countries are working out whether to invest amid indications of the start of a worldwide LNG glut. New export projects in Australia and Papua New Guinea are starting to push out proposed projects as demand weakens, Genscape, which provides energy- and commodity-market data, said last month. In addition, Tanzania and Mozambique have yet to finish regulations for gas development and production, which are needed before any final investment decisions are taken.
 
 
 
Pennsylvania company plans second LNG plant for local market
 
(Philadelphia Inquirer; May 15) - UGI Energy Services is doubling its capacity to produce liquefied natural gas in Pennsylvania, aiming to capture a bigger share of an alternative-fuel market. UGIES, a subsidiary of UGI Corp. of Valley Forge, Pa., announced May 15 it plans to build a $60 million plant in northeastern Pennsylvania to produce up to 120,000 gallons of LNG a day from 10 million cubic feet of Marcellus gas.
 
It will be the company’s second LNG production plant. UGIES also plans to build storage tanks with a total capacity of about 280,000 gallons, said Matthew Dutzman, vice president of business development. Traditionally, utilities have used LNG as a means to store gas for high-demand winter days, known as "peak-shaving." LNG is now experiencing growth in demand as a cleaner-burning, less costly alternative to diesel.
 
UGI, which operates three Pennsylvania gas utilities, has operated an LNG plant in Temple, Pa., since 1972. That plant was recently expanded to produce up to 120,000 gallons a day.
 
 
 
Vancouver regional council will oppose oil pipeline expansion
 
(Mission City Record; Mission, BC; May 15) - The Metro Vancouver regional district will formally oppose Kinder Morgan's proposed twinning (capacity expansion) of its Trans Mountain oil pipeline after a vote of the board May 15. The decision came after the release of a new projection of the environmental impact of an oil spill and a report from the City of Burnaby warning it could not contain a major fire at the tank farm near the pipeline terminal.
 
"If there is a serious or catastrophic incident at the tank farm we are incapable of being able to control that," Burnaby Mayor Derek Corrigan told the board. "The more we learn about it the riskier it gets," Vancouver Mayor Gregor Robertson said of Kinder Morgan’s proposal to expand its pipeline for moving Alberta oil sands production to the West Coast for shipment overseas. Other directors cited the Coast Guard's deficient response to the relatively small spill of fuel oil in April from a freighter in Vancouver harbor.
 
Not all directors supported the motion. Belcarra Mayor Ralph Drew and Langley Township Council Charlie Fox both opposed it, warning that if Kinder Morgan's pipeline push is stymied, large volumes of oil may end up rolling through B.C. on trains, at much greater risk to the environment and communities. "The oil is going to come to the coast one way or another," Drew said. "If it doesn't come by pipeline, it's going to come by rail car. And nothing scares me more than unit rail cars coming down the Fraser Canyon."
 
 
 
New York protests continue against offshore LNG import terminal
 
(Newsday; May 16) - A long line of opponents to a proposed offshore liquefied natural gas import project off Long Beach, New York, joined hands at the water's edge May 16 to symbolize their determination to keep the ocean unspoiled. "It's just the idea of a natural gas port in this beautiful, pristine place," said Johanna Mathieson of Long Beach. LNG carriers would connect to an offshore buoy and pipeline system to deliver their cargos.
 
Federal officials are reviewing plans for the Port Ambrose terminal sought by Liberty Natural Gas. The governors of New York and New Jersey both hold veto power. Company officials have said the terminal would curb seasonal spikes in fuel prices in the region. "Port Ambrose is needed, is safe and will reduce energy costs for New York consumers," company chief executive Roger Whelan said in a statement.
 
Opponents counter that renewable energy such as an offshore wind farm proposed in the same area is far less polluting and will not speed global warming. Finn Hinke, 43, of Long Beach cited the need to protect "our coastlines and our environment and all the waters." The protesters’ column stretched about 200 yards. Several protestors raised concerns about safety. "How could you ever think of putting a port out there with the storms we have?" asked Judy Weitz, 65, of Long Beach.

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