Alaska‘s gas agency and an oil and gas company with prospects on the North Slope have taken a step toward a deal that could one day provide gas for the $44 billion Alaska LNG project.
A subsidiary of Pantheon Resources signed a precedent gas sales agreement with 8 Star Alaska, a subsidiary of Alaska Gasline Development Corp., the company and the state agency said Tuesday.
The agreement primarily focuses on the supply of gas for an initial phase of the pipeline export project, the statement said.
That initial phase, estimated to cost about $11 billion, is designed to provide gas to the North Slope to address a looming shortage of natural gas from Cook Inlet that has long provided heat and electricity in Anchorage and other areas of the state. .
Frank Richards, president of AGDC, said in the statement that the agreement “solidifies the commercial foundation” for the initial phase.
“It provides enough transportation-ready natural gas, at consumer-friendly prices, to resolve the looming energy shortage in southcentral Alaska as early as 2029,” he said.
The agreement contains key commercial terms for a binding gas sales agreement to be negotiated. The terms include Pantheon supplying up to 500 million cubic feet per day of gas, according to the statement.
But there are major uncertainties regarding the plan.
London-based Pantheon Resources does not currently produce the natural gas that would be needed for the project. It is working to develop the Ahpun prospect and a nearby project on Alaska’s North Slope.
It has not yet made a final decision on the investment that would be needed before the company develops the Ahpun field for oil and gas production.
The Alaska LNG project has been unable to secure investment from potential private partners to support project costs. The initial phase of the project also needs private financing. The agency has signed other preliminary gas deals with major oil and gas producers in the past, but the project has continued to run into problems.
The state-led Alaska LNG project calls for an 800-mile pipeline carrying natural gas from the North Slope so it can be liquefied in southcentral Alaska and exported to Asian markets in ocean-going tankers.
This year, the gas line agency presented lawmakers with the new approach of prioritizing the pipeline, in part to help move the entire project forward. A gas pipeline would be built initially and then other aspects of the project would be built to support gas exports.
The Alaska LNG project has been underway for about a decade.
In April, the gas pipeline agency’s top board members asked the Legislature to provide another year of funding to keep the project alive.
If the pipeline agency cannot secure funding for the entire project or the initial phase of the pipeline, then staff have been directed to close the project at the end of this year, they said in a letter.
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