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Dan Sullivan, DNR Commission, Presentation to Commonwealth North_10-12-12
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Dan Sullivan, DNR Commission, Presentation to Commonwealth North_10-12-12


Alaska Department of Natural Resources Commissioner Dan Sullivan's presentation to Commonwealth North's Energy Action Coalition "Alaska's Natural Gas Opportunities. "

Alaska Department of Natural Resources Commissioner Dan Sullivan's presentation to Commonwealth North's Energy Action Coalition "Alaska's Natural Gas Opportunities. "

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  • 1. A LASKA G AS O PPORTUNITIESCOMMONWEALTHNORTH ENERGYACTION COALITIONAnchorage, AlaskaOctober 12, 2012 Commissioner Daniel S. Sullivan Alaska Department of Natural Resources
  • 2. O UTLINE PART I: Introduction to Alaska and its Enormous Resource Basin PART II:Progress on Gas Commercialization/LNG PART III:Why Alaska? Comparative Advantages Over Other Possible Sources of LNG Supply CONCLUSION 2
  • 3. P ART IIntroduction to Alaska and its Enormous Resource Basin 3
  • 4. S TATE of A LASKALand Base• Largest U.S. State—encompasses 586,412 square miles, which is approximately 4 times the size of Japan• Is larger than all but 18 sovereign nations• Has more coastline than all other U.S. states combined• Has more than 3 million lakes and half of the word’s glaciers• Is the least densely populated U.S. stateAlaska Department of Natural Resources• Manages one of the largest portfolios of oil, gas, minerals, renewable resources, water, and land in the world• Manages all oil and gas fields on state land, including two of the largest oil and gas fields in North America State of Alaska• Oversees all activities that occur on state land 4
  • 5. A LASKA ’ S M ASSIVE H YDROCARBON B ASINSNorth Slope Cook InletU.S. Geological Survey estimates that U.S. Geological Survey estimates that significantAlaska’s North Slope and Arctic Outer undiscovered volumes of hydrocarbons remain toContinental Shelf has more oil than any be found in the Cook Inlet:other Arctic nation • 19 trillion cubic feet of natural gas • OIL: Estimated 40 billion barrels of • 600 million barrels of oil conventional oil • 46 million barrels of natural gas liquids • GAS: Estimated over 200 trillion cubic feet of conventional natural gasAlaska has world-class unconventionalresources, including tens of billions ofbarrels of heavy oil, shale oil, and viscousoil, and hundreds of trillions of cubic feetof shale gas, tight gas, and gas hydrates • Mean estimated onshore gas hydrate resource is 590 trillion cubic feet gas- in-place 5
  • 6. P ART II Progress on GasCommercialization/LNG 6
  • 7. C OMMERCIALIZING N ORTH S LOPE G AS - S TATE -B ACKED E FFORTS & S IGNIFICANT S TATE F INANCIAL R ESOURCES -The State of Alaska is leading two state- The State of Alaska has significantbacked efforts to commercialize Alaska’s financial assets to assist with these abundant North Slope gas resources two efforts1. Alaska Pipeline Project (APP) • Alaska owns royalty gas—12.5% to 20%—as part of the state’s oil and • Private-sector led gas leases to companies • State funding and reimbursements • Alaska has the largest sovereign up to $500 million as an initial wealth fund in the United States— investment the Alaska Permanent Fund Corporation: $40 billion2. Alaska Gasline Development Corporation (AGDC) • Alaska has a budget reserve of $20 billion • State funded • Alaska has a retirement fund worth • Led by State of Alaska $18 billion corporation (AGDC) whose mission is to commercialize North • Alaska is triple-A rated Slope gas resources 7
  • 8. C OMMERCIALIZING N ORTH S LOPE G AS - S IGNIFICANT P ROGRESS -Governor Parnell’s Roadmap to Gasline Wall Street Journal: Alaska, Gas Firms 1. Resolve Point Thomson—25% of known gas Clear Way For Pipeline reserves on Alaska’s North Slope Point Thomson settlement “…paves the way for a pipeline project to ship natural gas from the North Slope, 2. Producers align during the first quarter of 2012 unleashing the states massive gas reserves.” - WSJ, 3/30/12 on an LNG project to tidewater 3. Two projects—under APP and AGDC— Financial Times: Oil Groups Agree on complete discussions by third quarter of 2012 $40bn Alaska Gas Project determining what potential exists to consolidate “ExxonMobil, BP and ConocoPhillips have reached projects agreement with the state of Alaska to take a significant step forward on a $40bn-plus project to export liquefied natural 4. Harden numbers on an Alaska LNG project by gas to Asia, resolving a long-running lease dispute that had the third quarter of 2012, and identify a been holding up progress. pipeline project and associated work schedule In a joint letter, the chief executives of the three companies said they were “aligned” on a plan to develop the huge gas 5. If milestones are met, the 2013 Legislature takes reserves of Alaska’s North Slope, which until now have been up gas tax legislation designed to move the stranded without a route to market.” - Financial Times, project forward 3/30/12 8
  • 14. P ART III Why Alaska? ComparativeAdvantages Over Other Possible Sources of LNG Supply 14
  • 15. H UGE G AS R ESOURCE B ASE• The North Slope of Alaska is • These numbers do not include the estimated to have over 200 trillion trillions of cubic feet of shale gas, cubic feet of conventional gas tight gas, and gas hydrates estimated for the North Slope• Conventional gas is not controversial—unconventional gas in • This is an almost inexhaustible supply the Lower 48 U.S. states remains of gas with new technology controversial • North Slope gas is “wet” gas with a• 35 trillion cubic feet of known high energy content (BTU value) reserves • An Alaska LNG project has complete• Prudhoe Bay reinjects 8 billion cubic certainty of supply; not all other feet of gas per day, which is enough projects do to meet Canada’s daily gas needs 15
  • 16. C O -L OCATED with E XISTING O IL & G AS I NFRASTRUCTURE• Existing oil and gas infrastructure on the North Slope can be utilized for a large- scale LNG project• The route for a large-scale LNG project would be the same or similar to the existing Trans-Alaska Oil Pipeline route, which will save on costs and have a limited impact on the environment 16
  • 17. E XCEPTIONAL R ECORD of R ELIABILITY• Alaska has a longstanding tradition of • Alaska is the only place in the reliably exporting LNG to Asia United States exporting LNG o Alaska has been exporting LNG to • Alaska does not use gas supplies Japan for over 40 years for political purposes o Alaska has transported 2.5 trillion cubic feet of gas to Asia (the majority to Japan) over this time o Alaska has never missed a LNG cargo shipment to Asia LNG tanker at the Kenai, Alaska LNG marine export terminal. Photo from ConocoPhillips, “The Kenai LNG Plant celebrates 40 years.” 17
  • 18. G EOGRAPHIC P ROXIMITY , P OLITICAL /L EGAL S TABILITY , & C OST C OMPETITIVENESS • Close proximity to Japan Alaska to Japan • Avoids strategic shipping B.C., Canada to Japan choke points that other sources of LNG must traverse Qatar to Japan U.S. Gulf of Mexico (via • Benefits from American Panama Canal) to Japan Australia to Japan legal and political stability and the rule of law U.S. Gulf of Mexico to Japan • No looming conflicts in the region • Proximity/shipping costs are very low • Cold weather efficiencies significantly decrease processing costs compared • Use of existing infrastructure and to warmer climates pipeline routes reduces costs 18
  • 19. C OST C OMPETITIVE C OMPARED to O THER G LOBAL LNG P ROJECTS Recent Studies To Support Competitiveness Brookings Institution (2012), the public policy Wood Mackenzie (2011), the global organization, published a policy brief that discussed research and consulting firm, completed a the strong competitive position of a potential, large- study for the State of Alaska to evaluate scale Alaska LNG to Asia project. the economic competitiveness of Alaskan • Alaskan exports may prove to be a source of strong LNG exports relative to other projects. competition at the margin for U.S. LNG in the Pacific • Alaskan LNG exports would be Basin. An Alaska project may be one of the least costly competitive and could generate between alternatives for delivering LNG to Japan in 2020 $220 and $419 billion • Alaskan LNG exports have a delivered cost structure below $10/MMBtu • Most competing Australian projects and proposed North American LNG exports yet to secure Final Investment Decision are expected to deliver LNG to Asia at a cost of $10-$12/MMBtu under current gas price assumptionsWood Mackenzie “Alaskan LNG Exports Competitiveness Study, AGPA, Final Report, July 27, 2011” 19Brookings Institution, “Liquid Markets: Assessing the Case for U.S. Exports of Liquefied Natural Gas,” May 2012
  • 20. W ORLD -C LASS B USINESSES & LNGP RODUCERS C URRENTLY O PERATING • World-class businesses and LNG producers have already invested billions of dollars on LNG studies and oil and gas infrastructure in Alaska • Companies are working closely together/integrating efforts • Highly trained workforce in Alaska can ensure competitive labor costs • Strong oil and gas service support industry already in place 20
  • 21. S IGNIFICANT P ROGRESS on E XPORT L ICENSE and O THER R EGULATORY M ATTERS• Existing Alaska LNG export facility has a • Previous and upcoming U.S. Department of Energy export license Environmental Impact Statements and has been reliably exporting LNG to Asia (EIS)—Yukon Pacific/AGDC for over 40 years • Federal Energy Regulatory• Not part of Lower 48 shale debate and Commission (FERC) controversy filing/resource reports o Stranded gas—no effect on national gas • State regulatory approvals are in market in the Lower 48 U.S. states place to produce and transport gas o Large LNG Alaska project will get more gas to Americans, not less• First Nation and Native land claim issues have already been resolved 21
  • 22. S IGNIFICANT P ROGRESS on E XPORT L ICENSE and O THER R EGULATORY M ATTERS Presidential Finding of January 12, 1988, set a strong precedent that may still be applicable today. 22
  • 23. D OWNSTREAM and U PSTREAMI NVESTMENT O PPORTUNITIES North Slope, North Slope Foothills, and Beaufort Sea Areawide Oil and Gas Lease Sales—November 7, 2012 Beaufort Sea North Slope North Slope Foothills 23
  • 24. C ONCLUSION• The State of Alaska will continue our focus on the strategic goal of aligning the interests of key stakeholders in an Alaskan LNG project.• For Alaskans, the key is to look at the substantial opportunity in front of us and we must work together to make this a cost- competitive, capital-efficient project.• There is a lot more work to do and the State feels a sense of urgency. 24