Posted on 09/05/2014 8:06:09 AM PDT by thackney
AIDEA board OKs early work, concession for North Slope plant for Interior supplies
On Aug. 25 the board of the Alaska Industrial and Export Authority passed a couple of resolutions that move forward a project to build a liquefied natural gas plant on the North Slope, for the supply of natural gas to Fairbanks and the Alaska Interior.
One resolution authorizes AIDEA to spend $1.6 million, in addition to an existing commitment of $4.5 million, for the early procurement of long lead-time items needed for the plant, while the engineering and design work for the plant is still in progress. The other resolution approves an agreement for the construction and operation of the plant by Northern Lights Energy LLC, a subsidiary of MWH Americas Inc.
LNG for the Interior
Referred to as the Interior Energy Project, the project involves the construction of a 6 billion cubic-feet-per-year capacity plant for converting North Slope natural gas into LNG, for trucking to the Interior using the North Slope Haul Road. The LNG will be transported to a storage and re-gasification facility in the Fairbanks North Star Borough, for distribution to gas consumers. Paid for through a combination of private and state funding, the objective of the project is to alleviate the high cost of energy in Fairbanks and the Interior by providing a supply of natural gas that can replace the use of expensive diesel fuel and fuel oil. An affordable supply of natural gas in the Fairbanks region could also alleviate air pollution issues arising from the use of wood stoves and liquid fuels.
In January AIDEA picked MWH as the contractor to manage the construction of the LNG plant.
Funding approved by the state Legislature for the project provides for a combination of a capital appropriation and a low interest loan through the AIDEA-managed Sustainable Energy Transmission and Supply Development Fund, known as SETS. MWH has said that it will provide its share of the funding through private equity.
Concession agreement
The agreement between AIDEA and MWH that AIDEA approved on Aug. 25 is called a “concession agreement,” recognizing that AIDEA wants to retain ownership of the LNG plant while granting MWH, through Northern Lights Energy, the right to build the plant and then to operate the plant for up to 30 years. By enabling the finalization of the concession agreement, the Aug. 25 decision will allow MWH to proceed towards closure of the financing of the project by engaging a contractor to operate the plant, contracting for the sale of LNG to gas utilities, completing negotiations for the purchase of gas as feedstock for the facility and assisting in the design of the plant, AIDEA says. In parallel with work managed by MWH, AIDEA says that it has contracted directly with engineering firm Kiewit for the construction of a pad on the North Slope for the LNG facility and to conduct early design, engineering and procurement work. Pad construction is scheduled for completion by Sept. 30.
Project funding
According to the concession agreement, the private equity component of the project funding will come from Northleaf Mid-Market Infrastructure Partnership LP, with minimum funding of $20 million. AIDEA says that it will provide state capital funding of up to $35 million and a SETS loan of up to $110 million. MWH’s bid for the project in late 2013 estimated the cost of constructing the LNG plant at around $217 million. At financial close for the project, AIDEA, MWH, Northleaf and Fairbanks electricity utility, Golden Valley Electric Association, will all commit to project funding or to becoming part of the project, AIDEA says. Golden Valley has been considering the use of LNG from the North Slope as a means of reducing the cost of power generation in Fairbanks.
AIDEA has previously approved a $20 million loan to help gas company Fairbanks Natural Gas build the LNG storage and distribution facility in Fairbanks.
Preliminary work
AIDEA says that, while the resolution approving the concession agreement with MWH will move the Interior Energy Project towards financial close, the other Aug. 25 resolution approving some early project funding will enable some equipment procurement and the preliminary front-end engineering design work needed to develop an estimated cost for building the LNG plant. That, in turn, will lead to a financial model for predicting the price of LNG delivered from the plant to customers in the Interior. Estimated pricing of the LNG is presumably required for contract negotiations with prospective LNG purchasers.
AIDEA says that it is sharing the project risk with MWH by bearing some of the costs needed to achieve financial close, with an understanding that MWH will reimburse AIDEA for these costs if financial closure is achieved. If financial closure cannot be achieved, the project will presumably come to a halt.
http://www.interiorenergyproject.com/Project%20Overview/index.html
The Interior Energy Project (IEP) introduced by Gov. Parnell provides the financial tools needed to bring natural gas to Interior Alaskans. Senate Bill 23 passed the Alaska Legislature unanimously in April 2013 and authorizes the Alaska Industrial Development and Export Authority (AIDEA) to provide the financing package to partner with the private sector to build a liquefied natural gas (LNG) plant on the North Slope and natural gas heating distribution system in Fairbanks and North Pole.
The IEP is anticipated to reduce monthly heating bills by 40 to 50 percent, resulting in up to $3,000 of annual savings to residential ratepayers. Clean-burning natural gas will help substantially improve Fairbanks and North Pole air quality by providing an affordable substitute to wood- and oil-burning heating systems. This will help the region once again meet federal Environmental Protection Agency (EPA) standards.
As a standard practice, AIDEA conducts substantial due diligence processes and only advances projects that are feasible on a technical and financial basis.
North Slope LNG Plant
The initial cost for the North Slope LNG facility is anticipated to be approximately $208 million. By 2015 it is expected that $101 million will be spent on regasification, storage and distribution to the medium-and high-density areas within the Fairbanks North Star Borough, with costs at full build out to be in the range of $258 million. The IEP will have the capability to expand and produce more LNG as demand grows.
The North Slope LNG plant will be sized to meet demand given the new gas distribution systems to be developed. Depending on initial demand, the LNG plant could serve half to three-quarters of estimated residential and commercial heating needs for customers in Interior Alaska. The Alaska Energy Authority (AEA) is also studying the potential rural uses for propane and LNG.
Trucking
North Slope natural gas will be liquefied and trucked to Fairbanks using the Dalton Highway. The Dalton Highway, also known as the “Haul Road” was built to support North Slope oil and gas activities and to handle an estimated 10,000 trips per day. At full production, the initial North Slope LNG plant is anticipated to require 18 deliveries per day.
Natural Gas Distribution System
In December 2013, the Regulatory Commission of Alaska (RCA) conditionally granted the Interior Alaska Natural Gas Utility (IGU) a certificate of public convenience and necessity (CPCN) to provide natural gas distribution in the service area for which it applied. The certificated area of Fairbanks Natural Gas (FNG) remained unchanged (Click here to see a map of the certificated service areas).
Both utilities have indicated that they anticipate it will take about six years to build-out each service area.
Very good.
Will the Grand Kenyan find a way to interfere with this?
No real involvement at the Federal Level. Not going to have a great impact outside of interior Alaska.
There will be some permits, but this will be a help for Fairbanks.
SO, all we need is
Gas wells (not drilled yet)
A drying plant (not built yet)
a liquification plant (not even planned)
a lot of trucks to haul the LNG (can be purchased at some point)
a (bigger) re-gassification plant in squarbanks (that’s just money)
Gas lines to deliver the gas to area homes (ouch, that’s going to cost)
Then, BAM, gas in the interior.... what a deal.
The North Slope produces a lot of Natural Gas already. It is used for power generation and process heat but most of it is re-injected. This is not a large unit compared to export terminals and the like.
A drying plant (not built yet)
Separation facilities already exist for the above Natural Gas use, but will likely be expanded for this.
a liquification plant (not even planned)
Read the article again. engineering and design work for the plant is still in progress
a lot of trucks to haul the LNG (can be purchased at some point)
A lot may be generous. Fairbanks Natural Gas started trucking LNG from the Cook Plant years ago. Enough trucks to get this started probably already exist in the state.
http://www.fngas.com/about.html
http://www.freerepublic.com/focus/f-news/2484724/posts?page=5#5
a (bigger) re-gassification plant in squarbanks (that’s just money)
Eventually, but how big is the one they had been using. Re-gassification is no where near as complex as liquefying. Gas lines to deliver the gas to area homes (ouch, that’s going to cost)
That one will take time. You are not going to get the whole area to switch to Natural Gas and buy new furnaces. Much of this will be serving new construction I would guess. I suspect we will see more power plants on the service as well.
For comparison of scale:
This LNG project: 6 billion cubic-feet-per-year capacity plant
At Prudhoe Bay alone, up to 8 billion cubic feet of natural gas are produced daily and injected back into the ground. Other fields produce gas as well.
My apologies - I was thinking of new gas not used to produce oil. Oil makes more money for the State than gas ever will.
Fairbanks has a population of >32K and that will shrink considerably as the Army is pulling 6,000 troops out of Ft Wainright. Generally 1 troop = 3 bodies what with families and all. Fairbanks has been shrinking for some time, the Army pullout will just speed things up.
Not much of a market to support all that infrastructure - and expensive infrastructure at that...
I suspect, that the North Slope would make some use of it themselves over time. I could see some of the trucking and drill rigs using LNG like has begun to happen in the lower 48.
For the folks burning fuel oil, this might make economic sense.
After all, LNG isn’t that much colder than ambient up there < /sarc>
Peanuts compared to world-scale developments underway.
This one at $54,000,000,000 I worked on 25 years ago and has yet to make a dime. http://www.ft.com/cms/s/0/282d2d02-62bb-11e3-99d1
The pipeline south is the real money maker for the North Slope.
Most of the gas will not be available until gas cap blowdown occurs, which signals the en of oil production.
Peanuts compared to world-scale developments underway.
Agree 100% This is a small, local project. I think it would be a good start that would lead to expanded use of Natural Gas in a state than consumes too much high priced diesel (arctic heating fuel) and has lots of NG.
This one...
No access to even the title without an account.
Sorry, I pulled it up ok. Must be I already registered.
Here’s another on Gorgon http://www.chevron.com/countries/australia/businessportfolio/
Nice, and all for less than an Obama golf day.
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