Skip to main Content
Energy

BP signs gas sale deal with Alaska pipeline development agency

BP has signed a binding agreement saying it is committing to sell gas to Alaska's gasline project, according to a release Monday from the Alaska Gas Development Corp.

Alaska's gas line project, a major initiative of Gov. Bill Walker's administration, depends on support from Alaska's major natural gas producers, and its future is far from secure.

Though the producers have expressed support for the project, BP is the first to sign such a commitment.

AGDC called the agreement, signed Friday, "binding." The state agency and BP agreed to key terms for gas sales of pricing and volume, the agency said.

But the agency did not disclose the volume or price, a key question in determining the project's viability.

Bob Dudley, BP chief executive, said in the agency's press statement that the project is good for the oil company, Alaska and the environment.

"We are very pleased to be part of the state's vision to bring Alaskan natural gas to new and expanding markets globally," Dudley said.

"This agreement means Alaskans are one step closer to cleaner air, more jobs and more affordable energy to power homes and businesses," Walker said in the statement.

AGDC calls the deal with BP a "precedent agreement," one that sets the stage for a long-term Gas Sales Agreement with BP to be completed later this year.

The Walker administration said the deal with BP is a major step forward.

But Sen. Cathy Giessel, R-Anchorage, said it leaves unanswered fundamental questions and underscores the need for agreements with other major North Slope producers.

"This is a nice press release about some results from negotiations that are moving forward and that's great, but it doesn't give me any more sense of security that this project is viable," she said.

Through leases with the state, BP controls about one-third of the giant volumes of gas planned for the project.

But other owners at Prudhoe Bay, ExxonMobil and ConocoPhillips, must also commit their portion of the gas to the project, Giessel said.

Walker, in an interview Monday, said he anticipates that similar agreements will be completed with ConocoPhillips and ExxonMobil "in the not-too distance future."

The Alaska project would super-chill North Slope gas into liquefied natural gas or LNG and ship it by oceangoing tanker to Asian utilities.

Giessel said it's questionable whether the agreement should be called "binding." Gas sales agreements involving the three major producers ultimately have to be approved by the Legislature, she said.

Former Republican state senator Mike Dunleavy, a challenger to Walker's re-election bid in 2018, said it's still unknown whether the project makes economic sense.

"Today's AGDC announcement appears long on optics and short on information," he said. "What price? What volume? What risk? To be borne by who? Do Alaskans trust this governor to make a decision that will impact them for generations?"

Walker said the financial markets will provide the ultimate test of the project's viability at the point that they decide to invest.

"But you can't get there until you have pieces we're putting together now," he said.

Major Chinese-owned companies are studying the project for potential long-term investment. China is Alaska's largest trading partner and leads the world in projected natural gas consumption, as it seeks to reduce carbon emissions and other pollution from coal-fired power plants and diesel engines.

First gas would not be produced until at least 2023, if at all.

Larry Persily, a former federal gasline coordinator, said it's not surprising key terms of the deal have not been disclosed, given that the state agency and BP are operating in a competitive environment.

He said it's a good sign the CEO of a major oil company agreed to put his name on the press release.

"This is a positive step, but it's just one of many," he said.

Local news matters.

Support independent, local journalism in Alaska.

Comments