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9/11/2018
AK, ExxonMobil agree on terms

By DAN JOLING
Associated Press

ANCHORAGE — A second major oil company has agreed to key terms for the sale of Alaska North Slope natural gas to a state-sanctioned corporation that seeks to build a $34 billion liquefied natural gas project, including an 800-mile (1,287-kilometer) pipeline to move gas to an ocean port.

The Alaska Gasline Development Corp. announced Monday that ExxonMobil has committed to a price and volume basis for the sale of natural gas from fields at Prudhoe Bay and Point Thompson along the state's north coast.

The development corporation reached a parallel agreement with BP in May. Negotiations continue with ConocoPhillips. All three producers are envisioned to be part of the project.

Andy Mack, commissioner of the Alaska Department of Natural Resources, said the commitment of gas is a milestone but just one of many steps necessary in the undertaking of such a huge project.

"BP in May, and now ExxonMobil today, are saying as clear as one can say at this point, that we're on board with the project, the project structure," Mack said at a press briefing.

Lieza Wilcox, a development corporation vice president, said knowing what the project would be paying for natural gas is crucial.

"It's very important as an early step for financing and for looking for investment into the next stage of the project," she said.

Prudhoe Bay and Point Thompson are anchor fields for the project and hold 30 trillion cubic feet of gas. Asia is the target market for most sales. The state has been looking at advancing the proposed pipeline with financial interests in China.

ExxonMobil is the largest holder of discovered gas resources on the North Slope. ExxonMobil Alaska President Darlene Gates in a prepared statement said the company for decades has been working on moving Alaska gas to market.

"This precedent agreement is good for Alaska and ExxonMobil and represents a significant milestone to help advance the state-led gasline project," Gates said.

The agreements on volume and price by are not final. Wilcox said that's intentional.

"To an extent, these contracts need to be progressed at the same time — the purchase of the gas contracts, the sale of LNG contracts, and to an extent, the financing agreement, to make sure we don't have holes in the promises and liabilities in association with each agreement," she said.

The project is going through the federal regulatory process with a final environmental review expected in November 2019 and a record of decision in February 2020. While that wraps up, the development corporation will be working out final details of the agreements with BP and ExxonMobil and seeking LNG purchasers in China, Japan and Vietnam.

In a related announcement, Mack said that the state had signed an agreement regarding a December 2019 production deadline at Point Thompson, which contains 25 percent of discovered North Slope natural gas.

A lawsuit settlement signed in 2012 required timelines for production at Point Thompson. Failure to meet requirements by the end of 2019 could have meant relinquishment of leases.

The new agreement aims to align Point Thompson production with the LNG project. The agreement extends the production deadline as long as the LNG project progresses.