The Alaska Gasline Development Corporation released a new report on Monday by the global research firm Wood Mackenzie concluding that project improvements have enabled Alaska LNG to reduce the cost of supply by 43%, which positions Alaska LNG ahead of U.S. Gulf Coast LNG projects.
During the past five years, AGDC obtained federal project authorization, reduced project construction costs by 12%, and implemented a new project finance structure utilizing third-party tolling. The changes, along with reduction in the expected natural gas purchase cost, is calculated to reduce Alaska’s LNG cost of supply to Asia to $6.70 per Metric Million British Thermal Unit, a reduction of 43%, while delivering a market-rate return. The new potential cost of supply falls below the expected price from Gulf Coast projects targeting the same Asian markets.
Alaska Governor Mike Dunleavy said:
“Alaska LNG holds tremendous economic development and environmental promise. Natural gas will be a reliable and responsible energy keystone for decades to come, and Alaska LNG is well positioned for success. We are closer now, more than ever, to realizing the decades-old dream of bringing our natural gas off the North Slope for the benefit of Alaskans and worldwide markets.”
Wood Mackenzie is forecasting that LNG demand growth remains robust beyond 2050, driving LNG prices higher. The report cites expected Japanese spot prices of $8 per unit, above Alaska LNG’s cost of supply. LNG demand will outstrip available supply within six years, strengthening the need for new projects like Alaska LNG, according to the firm.
The analysis identifies opportunities for further cost reductions, including the $26 billion Alaska LNG federal loan guarantee included in the infrastructure legislation signed into law in November 2021, and implementing tax reforms that bring Alaska in line with other U.S. jurisdictions.
The report, Alaska LNG Competitiveness Analysis, can be viewed below:
WM_Alaska LNG Competitiveness Analysis_FINAL_20JAN2022