Alaska Gasline Development Corp. (AGDC) has signed a preliminary agreement to source gas from Pantheon Resources PLC for Alaska LNG, a federally authorized project to export up to 20 million metric tons of liquefied natural gas (LNG) per year.

The so-called gas sales precedent agreement (GSPA) contains main terms that would be contained in a future binding GSA between AGDC and London-based Pantheon, including the supply of up to 500 million cubic feet per day (MMcfpd) to the liquefaction project for an extendable 20 years.

The GSPA also set the maximum base price for the feed gas at $1 per million British thermal unit in 2024 dollars, AGDC and Pantheon said in a joint statement. The GSPA was signed between AGDC subsidiary 8 Star Alaska LLC and Pantheon subsidiary Great Bear Pantheon LLC.

In Alaska, Pantheon plans to develop two field discoveries, Ahpun and Kodiak, which sit onshore state land in the North Slope. Kodiak has been independently certified to contain 5.4 trillion cubic feet of gas and 1.2 billion barrels of marketable liquids, in the best-estimate scenario for contingent recoverable resources, according to a Pantheon statement April 9. Pantheon is still working on a resource estimate for Ahpun.

The signing of a GSA in the future is conditional on Pantheon reaching affirmative final investment decisions (FID) on these upstream projects, as well as AGDC making an FID for Alaska LNG. AGDC plans to reach an FID mid-2025. Pantheon also needs permits and regulatory approvals to deliver gas for Alaska LNG.

Alaska LNG, which received export authorization from the Energy Department last year, is pursuing a phased development to make it attractive to investors. The GSPA is part of phase one.

“Phase 1 of Alaska LNG does not involve construction of an LNG plant, and as a result has a materially lower capex requirement and construction timeframe, allowing gas transportation as early as 2029”, the joint statement said.

AGDC president Frank Richards commented, “This agreement solidifies the commercial foundation needed for the Phase 1 portion of Alaska LNG and provides enough pipeline-ready natural gas, at beneficial consumer rates, to resolve Southcentral Alaska’s looming energy shortage as soon as 2029”.

“Phasing Alaska LNG by leading with the construction of the pipeline will make Alaska LNG’s export components more attractive to LNG developers and investors, and this agreement will help unlock the project’s substantial economic, environmental, and energy security benefits for international markets as well as for Alaska”, Richards added.

AGDC is in talks with potential partners for the construction of the 807-mile pipeline from the North Slope to Southcentral Alaska. Alaska LNG is planned to deliver up to 3.3 billion cubic feet of gas per day from the North Slope to overseas markets, according to AGDC.

“AGDC is continuing advanced discussions with an established North American pipeline developer and Alaska utilities to complete the commercial structure that will make a natural gas pipeline from the North Slope to Southcentral Alaska possible and further enhance the prospects for the overall Alaska LNG export project”, AGDC spokesperson Tim Fitzpatrick told Rigzone.

Gas Price Adjustment

To lessen the upstream cost burden on Pantheon, the GSPA allows the base price of the gas that Pantheon would supply Alaska LNG to be reduced if state authorities lower financing repayment costs “and/or enable other commercial opportunities”, the joint statement said.

“Furthermore, securing financing for Phase 1 of Alaska LNG could potentially increase commercial alignment for the complete project and thus potentially provide additional demand for Pantheon’s associated natural gas above the initial 500 mmcfd plateau”, the statement added.

“The GSPA potentially opens up additional funding pathways for the Alaska LNG Project and the Ahpun field development activities. This may relieve Pantheon of the need for equity dilution following FID, in line with the Company’s guidance to secure the path of least value dilution for existing shareholders”.

Court Battle

While the GSPA marked a milestone, a suit has been filed by environmental watchdogs, taking issue with the route of the pipeline.

The Center for Biological Diversity and Sierra Club on May 30 sued federal fisheries authorities alleging that their biological opinions had failed to fully examine the harms posed by Alaska LNG to wildlife species.

The petition for review filed before the United States Court of Appeals for the Ninth Circuit seeks to throw out the opinions of the Fish and Wildlife Service (FWS) and the National Marine Fisheries Service (NOAA Fisheries). The opinions issued by the fisheries authorities “violate the Endangered Species Act by not fully examining and mitigating the project’s harms to polar bears, Cook Inlet beluga whales and North Pacific right whales”, the plaintiffs said in a joint statement.

“The pipeline would connect drilling operations on the North Slope to an export terminal on Cook Inlet and bring tanker ships through the habitat of endangered Cook Inlet beluga whales and North Pacific right whales”, the Center for Biological Diversity and Sierra Club said in their statement. “The Federal Energy Regulatory Commission estimates the project would increase large vessel traffic in the inlet by up to nearly 75 percent.

“Cook Inlet beluga whales are critically endangered. The population has declined more than 75 percent since 1970, and scientists believe their recovery is hindered by noise pollution and the cumulative harm of multiple, human-caused stressors.

“The eastern North Pacific right whale population ranges from the Bering Sea to Baja California and is down to only about 30 individuals. With few reproducing females, the population is at extreme risk of imminent extinction”.

Named as defendants are the FWS; Interior Secretary Deb Haaland, whose department oversees the FWS; NOAA Fisheries; and Commerce Secretary Gina Raimondo, whose department oversees NOAA Fisheries.

AGDC rejected the suit’s claims. “Alaska LNG has withstood intensive environmental scrutiny by two successive administrations because of its obvious and abundant benefits, which include reducing global emissions by up to 2.3 billion tons, strengthening allied energy security, and finally ending longstanding air quality problems plaguing Interior Alaska villages and communities”, Fitzpatrick said in a statement to Rigzone.

The Interior Department and the FWS declined to comment. NOAA Fisheries said it could not comment on litigations.

To contact the author, email jov.onsat@rigzone.com