Alaska LNG Would Compete in Changing Market

In evaluating the possibility of piping North Slope gas to an LNG export facility, players must take stock of potential supply competition from Canada, Asia and Australia, say experts.

Even as the long-awaited pipeline project to bring North Slope gas to markets in the lower 48 is finally being realized, several state leaders have proposed throwing state support behind a scheme that would send that supply overseas instead.

Despite short-term forecasts that LNG supplies will be greater than demand, a few years out that situation is likely to reverse itself, say industry watchers. That could be good news if an Alaska LNG facility were to get underway relatively soon.

But LNG shipments from Alaska would most likely be destined for markets in the Pacific Basin—a region which is already being served by multiplying projects in Australia, the Middle East and Papua New Guinea. Projects in those locations are sizeable and benefit from the added economy of not having to transport their gas via an 800-mile pipeline to liquefaction facilities, which could pose an additional challenge to Alaskan gas’s competitiveness.

Nevertheless, with Chinese gas demand expanding and continued demand from Korea, Japan and Taiwan, shipping LNG to Asia looks economically more appealing than sending it to the depressed U.S. market.

Advocates of the original pipeline plan maintain that by the time the pipeline is built, gas demand and prices in the U.S. will have rebounded thanks to an already accelerating shift to using natural gas for power generation.

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