New LNG project avoids pipeline debate, electing instead for ice breakers and a Bering Sea shipping route

Qilak LNG CEO Mead Treadwell discussed possible shipping routes from Point Thompson. Alaska to Asia.
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ANCHORAGE (KTUU) - For decades, the State of Alaska has been looking for a way to capitalize on the natural gas reserves along the North Slope. The final environmental impact statement for the Alaska LNG pipeline project is expected next spring, but there are still parties who believe the line meant to carry natural gas from Prudhoe Bay to Nikiski faces too many obstacles to come to fruition.

Qilak LNG wants to avoid that debate entirely. A subsidiary of Dubai-based Lloyds Energy, Qilak is led by former Alaska Lt. Governor Mead Treadwell. On Wednesday, the LNG company announced a 20-year head of agreement with ExxonMobile, to export 4 million tons of natural gas per year.

Treadwell and Qilak President David Clarke believe that the success of the Yamal LNG project has in Russia is evidence that shipping gas from the Arctic to Asian markets through the Bering Strait is the answer. Treadwell says the route from Point Thompson to Asian markets is only 40 miles longer than a route from Nikiski, at two-thirds the cost required to building a pipeline across Alaska.

The Russian operation currently utilizes 15 LNG-capable ice-breaker ships. According to Qilak, both the ice breakers and LNG facilities needed to begin operations at Point Thompson will likely be constructed in Asian shipyards. Feasibility studies are scheduled to begin at the end of 2019. According to Treadwell, the target for a financial investment decision is 2021.

"It may be possible to get this module in place, offshore, sometime in the summer of 2024 ... That could mean production would begin in 2025," he said.

Clarke, a former project manager at BP, told KTUU that advances in shipping technology and changes in the climate have made the concept of shipping through the Bering Strait a reality.

"This concept was first thought of in 1984," Clarke said. "A lot of the conditions to make it viable then, were necessarily in place, but a lot has changed since then."

Per Clarke, these LNG-capable ice breakers will cost between $300-320 million per vessel. Qilak would need to lease a minimum of 4 ships in the initial stages of their proposed operation. The tankers in question feature designs that allow for travel in either direction. The ship's build includes a spoon-shaped, ice-breaking stern. The propellers can mill against ice as needed, and once ships arrive in open water, the entire vessel can rotate and move quickly with a conventional bow. The ships would also run off of excess natural gas.

Some of the concerns brought forward during Wednesday's announcement included the possible impact on sea ice, which many northern communities rely on for subsistence purposes. Qilak's leadership team has pledged to work with the North Slope Borough and the Marine Mammal Commission throughout their process.

As far as bringing gas from the North Slope to other areas of the state, Treadwell acknowledges that it would be possible to truck gas to communities along with the road system. It was also noted that because the LNG ice breakers are not built in America, the Jones Act would leave Alaska ports off-limits. Smaller, American-made ships would not be needed to make deliveries to those communities

Next month, Qilak LNG representatives plan to travel to Tokyo, where they'll sign an agreement with the Japanese Bank for International Cooperation to finance the feasibility study.

*Editor's note: Minor changes were made within this article to properly reflect AP style and to clarify the estimated price figure per vessel.

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