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October 23, 2007

Alaska has been an LNG supplier since the 60's - What is new?

Analysis of: Alaska can export LNG to Pacific Rim | today.reuters.com
This analysis is solely the work of the author. It has not been edited or endorsed by GLG.
Analysis By:
Bill Derrick, Director of EstimatingBill Derrick
Director of Estimating, Fluor Corporation
Implications: Liquefaction and pipelines in Alaska address the local desires to keep revenues and jobs in Alaska. Building a pipeline to somewhere in the south, like Valdez is very possible. ROW (Rights of Way, pipeline corridor) are already permitted and mostly available, and the access is available. Knocking off 1,350 miles off the land pipeline will pay for the liquefaction facilities. Ships for transporting LNG should be available. Schedule for an all Alaska facility should be advantageous.

Analysis:

I think you will find lots of support for the all Alaska option, when you consider permitting, funding, unions and labor availability.  There is an option to convert the existing oil pipeline into a gas line, giving it a second life, and allowing a new but smaller oil pipeline to be built. 

If a new oil pipeline could be built in 4-5 years, then the converstion of the former oil pipeline to a gas line could take as little as two years there after.  If you used only the converted 48" oil pipeline you would limit gas production to the the flow through a 48" line (likely derated).  If a parralel 24"-36" gas line could be built simultaneously using the supports/routing for the new oil line, and be available at the completion of the oil line.  Gas flow could ramp up with in two years there after using the rehabilitated 48" line.  I would guess you could get as much as 4-5 BCF per day through a properly sized set of gas lines.

The liqifaction faciliites could be built in phases to minimize labor excess demand and extra infrastructure requirements, and could be brought on line when the rehabilitation 48" line is available.

Using the existing line offers more options for North American pipeline suppliers, since the wall thickness and size are not beyond current mill capacilites.  The shorter pipeline length might permit the greater portion of pipe manufacture to be awarded to North America suppliers.

The reduction in overall pipeline length will help pay for the liquifaction facilities.  LNG from Alaska could serve both pacific rim markets and US markets.  LNG from a Valdez facility could hit the markets in 2013 or 2014.



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