A former lieutenant governor and former BP executive believe they have a quicker and cheaper way to ship North Slope natural gas by delivering it from the Arctic to Asian markets on ice breakers.

If so, this could end the decades-long efforts to rely on a pipeline as the conduit for getting natural gas off the North Slope.

It could also overtake the state-backed $44 billion AKLNG project that calls for an 800-mile pipeline to Nikiski before it would be sold overseas.

Qilak LNG’s Chief Executive Mead Treadwell said if all goes well, he believes the company can begin shipping natural gas by 2025.

 

Treadwell, who served under Sean Parnell as lieutenant governor, estimates the project would cost $5 billion, but that does not include ice breaker costs. He said the company will use the next year for a full feasibility study.

“Russia is sailing right by us in the Bering Straits carrying as much gas every year as an Alaska pipeline would carry,” Treadwell said. “If we can do this ourselves at a much lower cost and start out with a small pioneering project, we can see whether or not we too can be competitive in that Asian market.”

Treadwell is joined by former BP project manager David Clarke, who will serve as Qilak’s president and chief operating officer.

The project also has support from Exxon Mobil Corp. — long considered by the industry and state lawmakers as a key to any successful natural gas project.

Exxon Mobil and Qilak signed a non-binding agreement that outlines basic partnership terms. This is known as a heads of agreement; in this case Exxon would supply gas from its Point Thomson field, where it has 6 trillion cubic feet of gas reserves.

“Exxon Mobil sees the development of Qilak LNG 1 Project as an opportunity to develop Alaska’s gas resources,” said Darlene Gates, president of [Exxon Mobil] Alaska. “As the largest holder of discovered gas resources on the North Slope, [Exxon Mobil] has been working for decades to tackle the challenges of bringing Alaska’s gas to market.”

For years, the state and the industry have pursued ways to deliver North Slope gas to domestic and international markets, but the changing dynamics — declining natural gas prices, new technology, politics — have stalled previous attempts, but after hundreds of millions have been spent.

Govs. Frank Murkowski and Sarah Palin each had plans for a pipeline that would have run through Canada and into the Lower 48, but emerging technology known as fracking made that route unaffordable.

Gov. Sean Parnell and former Department of Natural Resources Commissioner Joe Balash drafted a plan to ship gas to a liquefaction plant in Nikiski where it would be exported to Asian markets, but international competitors were well ahead of the markets.

When North Slope leaseholders decided to shelve the project because of costs, Gov. Bill Walker decided the state could move forward on its own. Under current Gov. Mike Dunleavy, the administration is still pursuing a federal permit.

In a prepared statement, Dunleavy’s communications office said he "encourages and supports all business concepts that can successfully monetize the trillions of cubic feet of natural gas at Point Thomson and other areas on the North Slope.”

Senate President Cathy Giessel, who previously chaired the Senate Resources Committee, said having the private sector pursue this project bodes well.

“The private sector is pretty good at making sure it does pencil out,” she said. "We’ll see what happens. I’m not holding my breath. There are a lot of considerations. [...] The question of how to get it out to a large vessel is a significant question.”

Former federal pipeline coordinator Larry Persily said it’s too early to project whether this project will succeed.

“Does this have a better chance of success than the Alaska LNG project? Yeah, I think so,” he said. “It’s smaller. It’s less of a bite. They don’t have to sell as much gas, which means you don’t have to find as many customers."

He continued, "This notion of right off the slope seems to have advanced commensurate with the ice receding. I think that has added some impetus to it, make people think it’s more possible. But, there’s still winter ice there, and you still got to run those plants 52 weeks a year.”

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