And to discuss the news, Exxon held an invitation-only luncheon at the Dena’ina Center in downtown Anchorage, following the meeting with the Governor.
Security was high as lawmakers and business leaders arrived in the lobby. The rest of the public was blocked from attending the luncheon.
The meeting was a who’s who in Alaska politics, with legislative leaders and two former governors in the crowd.
The question many longtime observers of Alaska’s oil patch are asking: how much was for show and how much was substance?
Although no firm commitments were made to build a gas line, former governor Tony Knowles called the meeting historic.
“It’s a dog and pony show with possibility, with real possibility,’ said Tony Knowles as he headed out of the luncheon. “If it wasn’t for real, they wouldn’t be coming up here. There would be no purpose, if there was just going to be another disappointment.”
Disappointment has been the main story line for commercializing Alaska’s natural gas, which has been stranded from market by the roller coaster swing of prices and the industry’s desire for a long term tax structure.
But Governor Parnell says the three producers and he are now in agreement -- that the most likely market for Alaska gas is now Asia, not the United States.
“When you combine (the) shale gas explosion in the Lower 48 -- when you combine a tsunami in Japan last March, and you combine the growing, increasing demand in China and India, the whole Asian and Pacific Rim -- that’s a changed dynamic from 2011 forward,” said Parnell.
There are very few details fleshed out in this joint venture, such as the route for the pipeline. Parnell says he’s been careful to say it would end at “tidewater,” because it’s up to the market to decide where it would end. Parnell did say he promised producers he would push for changes in the tax structure, streamlined permitting and roads to resources – to help bring down their costs.
One thorny issue did come up in the governor’s meeting – settling the legal battles over Pt. Thomson, a field that’s critical to filling a pipeline, no matter where it goes. Exxon, which owns 36 percent of the unit, has already settled with the state. But BP, which owns 32 percent, has not reached agreement with the state – and neither has Chevron, which owns 25 percent, nor ConocoPhillips, which has a 5 percent stake in Pt. Thomson.
“That’s one of the alignment issues that the companies are working through,” said Bob Dudley, CEO for BP. “There’s always that first step in sitting down and reaching agreements. Sitting down and talking it through.”
The economics, says Dudley, are the main incentive -- a forecast for sustained high prices for LNG on the Asian market.
“To commercialize large quantities of gas, our three companies would have to work together going forward,” said Dudley, who believes that the framework created by the Alaska Gasline Inducement Act, or AGIA, will play a key role in bringing an LNG line to fruition.
It was only a few years ago that BP and ConocoPhillips rejected the AGIA process and created their own company, the Denali Pipeline Project, to bring North Slope gas to the Lower 48. The joint venture folded last year.
Jim Mulva, CEO of ConocoPhillips, says this new effort won’t be easy.
“We all have to give and take some,” said Mulva. “We can’t have unrealistic expectations of who wins or loses. We’ve got to find a way that we all win, and that from the investors or the producers, as well as from the state of Alaska.”
