The conflict with Iran could lead to the construction of an Alaskan natural gas pipeline and export project. One project in the works since 2014 would entail an 810-mile pipeline to bring natural gas south from wells on the state’s North Slope for liquefaction and shipment to Asian customers. The project is estimated at $44 billion. The effective closure of the Strait of Hormuz and Iranian attacks on Qatari liquefied natural gas (LNG) plants are driving soaring LNG prices in Asia and Europe, prompting customers to seek more stable and secure supplies. That has accelerated interest in turning preliminary purchase plans into firm contracts and pricing deals, particularly from Asian customers, who get most of their oil and natural gas from the Middle East. In addition to benefiting the international market, the pipeline will provide a stable supply for Alaskan home heating, power generation, and industrial needs, while eliminating the need to import gas into Alaska. The “final investment decision” is expected to come within weeks.
Another potential way to move stranded North Slope gas (about 35 trillion cubic feet) to market was announced by Polar LNG. According to the Oil & Gas Journal, this LNG facility would use existing Prudhoe Bay infrastructure, transporting gas via a short pipeline to a modular, nearshore gravity-based facility that would process and liquefy it. The gas would then be loaded onto specialized ice-class carriers for year-round export. The company is planning to begin production at the seven-million-metric-ton-per-year plant between 2029 and 2030, at a cost of $8–9 billion.
According to Semafor, Polar LNG is exploring the potential repurposing of sanctioned equipment built for Russia’s Arctic LNG 2 project and is seeking permission from the US government to acquire parts affected by the Biden administration’s sanctions. Obtaining pre-built equipment is critical to meeting the project’s timeline. The project, when completed, would have one of the shortest LNG shipping routes from North America to key Asian markets, approximately 3,600 miles to Japan, for example, compared to over 10,000 miles from the U.S. Gulf Coast.
While cheaper, Polar LNG faces severe challenges of transiting ice-laden waters. As The Alaska Story reports, a Russian gas project has not been able to deliver shipments recently due to icebreaker breakdowns, and Russia has a much larger icebreaker fleet than the United States. Russia’s Arctic LNG 2 project is operating at only about 25% capacity because the ice is too thick for most tankers, so it relies on a single ice-class tanker to move fuel.
The Polar LNG project is complementary to the pipeline LNG project, which is partnered by the Alaska Gasline Development Corporation and the privately owned Glenfarne. Alaska has 25% ownership in the project. According to Governor Mike Dunleavy and Former Senator Mark Begich, the pipeline project has received its Federal Energy Regulatory Commission certificate and Department of Energy license. The necessary engineering has been completed, permits have been obtained, and lawsuits are over. The right-of-way is secured, and the gas is available to put into the pipe. Buyers in Japan, South Korea, and other Pacific partners have expressed interest in purchasing its gas rather than relying on Middle Eastern gas. Furthermore, the pipeline project will supply the needed gas to Southcentral Alaska to heat Alaskan homes and fuel military bases, while also creating more jobs.
The final holdup is with the mayors of the boroughs through which the pipeline will transit. Governor Dunleavy has a bill that would replace a statewide $20 million property tax on oil and gas infrastructure, split between state and local governments, with a volumetric tax based on the volume of gas flowing through pipelines. According to the borough mayors, the volumetric tax would bring in far less revenue than the property tax — about 90% less, which would not be enough to cover local costs, such as additional students in schools, more vehicles on the road, and more fire and EMS calls, resulting in some of the project’s cost having to be paid by local taxpayers.
Analysis
The energy crisis resulting from the effective closure of the Strait of Hormuz due to the war with Iran is causing new interest in energy from Alaska’s North Slope. Alaska has the potential to be an energy powerhouse. As IER President Tom Pyle wrote for RealClearEnergy, “We cannot afford to keep Alaska locked up any longer. If we are serious about American energy independence and prosperity, the time is now to let Alaska do what it does best – develop and produce its God-given natural resources.”
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