Larry Persily doesn’t believe the Alaska Liquefied Natural Gas Project, the long-envisioned gas pipeline from Prudhoe Bay, will happen. And he thinks Alaska will probably need to import natural gas in the future. That was the thesis of his lecture, “Gasonomics,” delivered Thursday evening at Kenai Peninsula College.
Persily — a longtime Alaska oil and gas observer and journalist — drew a full room for his lecture, billed as an evening of “blunt economics and humor on the state of natural gas.”
“I haven’t felt this popular in 20 years, when one of my jobs at the Department of Revenue as deputy commissioner was to hear appeals on Permanent Fund Dividend denials,” Persily said to laughter. “And people would turn out for that, because they were hoping I was gonna overturn the rejections.”
Persily has been a longtime critic of the AK LNG project, criticizing its high costs and unrealistic scope. The plan to install an 800-mile pipeline to bring natural gas from the North Slope to Nikiski, where it would be liquefied and shipped to buyers and used by state utilities, has been discussed for decades.
In his lecture Thursday, Persily said the theory behind the project, that buyers in east Asia would want to purchase Alaska’s natural gas, has proven false.
“On the map, yes. In theory, yes,” he said. “It hasn’t turned out that way.”
He said Japan is taking in less gas as it uses more nuclear and renewable energy. South Korea isn’t interested in the kind of long-term contacts the pipeline would need, and sees options elsewhere in the world. And China, he said, gets its gas from Russia.
Persily said a smaller but similar project in British Columbia has pre-existing infrastructure and more natural gas.
“Lots of gas, they’ve already built the pipe, they built the plant,” he said of that project. “If there’s enough (demand) in Asia for North American gas they can just expand it, a lot cheaper than we could ever do it.”
On top of the market conditions, Persily said another challenge will be federal authorization. Although AK LNG currently has construction authorization, it expires in 2030.
“There’s no way, even if there’s a gift from heaven, that this thing could happen by 2030,” he said.
He said by then, when operators would need to seek an extension, the political climate around fossil fuel projects will likely be even more hostile.
But Southcentral Alaska is still staring down a natural gas shortage for its utilities. Gas producers have said they soon won’t be able to fill contracts, as development in Cook Inlet becomes more difficult and more expensive.
One state-proposed solution has been incentivizing Cook Inlet production, which Persily critiqued. He said tax credits offered over the years have only cost the state money, and not paid off in production.
Persily said the reality is that Alaska will need to import natural gas. And he said he expects imports to come at a higher premium than the Railbelt’s current supply, because of Alaska’s relatively small needs.
“We’re not gonna be a big customer,” he said. “We’re not gonna be the Walmart that can negotiate volume discounts.”
He said recent collaboration between utilities along the Railbelt has been promising, especially as they work on developing renewables. A recent federal grant that will allow transmission of renewables in the Railbelt will require a state match, but he’s skeptical of whether that will happen fast enough.
“Utilities, and the public, and elected officials they — skated by the 2010 energy shortfall,” Persily said. “Now it’s real, and this whole idea of importing LNG has kicked them in the head.”
He said time is also of the essence for imports.
“The good thing is, they’re dealing with it as well as they can, with the timeline they’ve got,” he said. “They’ve just gotta make a decision next year. If they’re gonna import, they’ve gotta start permitting, contracts. It’s a go-no-go decision.”
When asked about any other good news, Persily said that luckily spring training starts soon.
Source : Alaskapublic