Team Alaska - Missing

Japan continues to lobby American officials on the topic of LNG exports (Platt's Link).  Quote:

Japanese officials will meet with a US delegation headed by Deputy Energy Secretary Daniel Poneman later Tuesday to ask that Washington allow exports of LNG to Japan, the world's biggest importer of liquefied natural gas, a Japanese delegate said. 

Platts assessed its Japan/Korea marker Monday at $15.45/MMBtu for April, while its Northwest and Southwest European markers were assessed at $10.95 and $11.35, respectively, for April. In contrast, the NYMEX April gas futures contract settled at $2.269 Monday.

Where's all the Alaskan leadership?  Senators Murkowski and Begich, Governor Parnell, Representative Don Young  - where are you when LNG customers come knocking?  You would think a project to sell Alaskan LNG priced at $12 -$15 would motivate these elected leaders to weigh in and lend a hand, a photo op, a trade mission, something.  Instead they are missing and silent.  The LNG for Japan opportunity may be the last chance for decades.

Larry Persily interview

Larry Persily, Federal Gasline Coordinator was interviewed by the Petroleum News. Here's a link to a .PDF of that interview.

From the interview:

Petroleum News: Getting back to the fiscal negotiations with the state, where do you start?

Persily: ....Start with a blank piece of paper and see what you can get done.

...I don’t see any permit problem that can’t be resolved. I think the economics and fiscal terms and the politics are what would stop this project.

Trends and News

Shale gas development has threatened the Alaska Gas Pipeline, but there are trends that will build demand for North American gas:

Japan drops nuclear expansion plans (LINK) - this can only boost LNG demand.

Japan's reliance on LNG grows (LINK)

Southern Union, BG apply for LNG export license (LINK). The lower 48 is awash with $4/mmbtu shale gas - it's only a matter of time before this cheap gas is sponged up by LNG exporters. More on "wet shale" and LNG (LINK).

The natural gas glut is disappearing (LINK).

Fed AK-Gas Coordinator Larry Persily still thinks the Alaska gas pipeline is a go: (LINK) A quote from the News Miner article:

Dozens of federal agency personnel in Washington, D.C., and Alaska are working hard, reviewing the project’s first resource reports that came in last month, preparing for permit applications and talking with project sponsors to ensure everyone knows what’s needed. Canadian officials are doing the same, from Ottawa to Whitehorse. Only the private sector, however, can decide if the pipeline is a good business decision. The best course of action is a single project sponsor team, working with the state and federal governments to pull together the deal.

More on LNG markets and the push to export LNG from the lower 48 (LINK).

Mythbuster - Larry Persily

He may not get his own reality TV show busting Alaska Gas Pipeline Myths, but here's a link to Larry Persily's ideas about myth's surrounding the Alaska Gas Pipeline. Larry Persily is the Federal Coordinator for the federal coordinator's office for the Alaska natural gas pipeline. Here's a summary of the myths he debunks:

Myth: Shale gas has destroyed the market for Alaska gas.

Myth: The Lower 48 doesn’t need Alaska’s gas.

Myth: It would be better to export Alaska’s gas because gas prices are higher in Asia.

Myth: Well, then we should export our LNG to the U.S. West Coast.

Myth: We don’t want to let Alaska’s gas go through Canada, or let it be siphoned off to meet Canadian needs.

Myth: The EPA is our enemy.

I can't say that I agree 100% with Persily, but he is on the right track. Shale gas can not defeat Alaska Gas. Earlier this month he made this presentation called "What will it take to get a gas pipeline?" His reasoning makes good sense and I applaud his efforts to build consensus and momentum.

Shale Gas - Is the magic wearing off?

The Alaska Dispatch carried Larry Persily's recent speech on the future of the Alaska Gas Pipeline. (LINK). According to Persily:

I'm not here to tell you it will be built this decade. But I assure you it is not dead; shale gas has not driven a silver stake through the Alaska pipeline; the market has not forgotten us. It may not be paying as much attention as we would like, but that could change.

What about shale gas? Well ExxonMobil (XOM) joined the shale game through acquisition of XTO. Exxon has ideas about exploring for shale gas around the world. XTO cost Exxon $41 Billion (with a "B") in stock. My guess is that Exxon's investment in shale gas will pay off with the greatest successes in Europe.

Chesapeake Energy on the other hand shows signs that owning big shale gas plays + debt + $4/MMBTU may be a bad business plan. Yesterday they announced a $600 million cash infusion from Asian investors (LINK).

In a separate announcement Chesapeake says

Through a series of transactions over the next 24 months, including the preferred stock placement announced today, the company is planning to raise up to $5.0 billion in order to repay up to $3.5 billion of senior indebtedness and increase its investment in liquids-rich plays by up to $1.5 billion.

So judging from their actions it looks like $4/MMBTU shale gas can break you and leave you wanting some liquid hydrocarbons. So I tend to agree with Mr. Persily - Shale gas at $4/MMBTU is not going to drive a stake in the heart of the Alaska Pipeline, that's a job for the politicians.