Legislature(2025 - 2026)BARNES 124
03/05/2025 01:00 PM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): an Introduction to the Global Liquefied Natural Gas Market and Implications for Alaska | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
March 5, 2025
1:05 p.m.
DRAFT
MEMBERS PRESENT
Representative Robyn Niayuq Burke, Co-Chair
Representative Maxine Dibert, Co-Chair
Representative Carolyn Hall
Representative Donna Mears
Representative Zack Fields
Representative Dan Saddler
Representative George Rauscher
Representative Julie Coulombe
Representative Bill Elam
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
PRESENTATION(S): INTRODUCTION TO THE GLOBAL LIQUEFIED NATURAL
GAS MARKET AND IMPLICATIONS FOR ALASKA
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
NICHOLAS FULFORD, Senior Director
Liquid Natural Gas and Energy Transition
GaffneyCline Energy Advisory
Houston, Texas
POSITION STATEMENT: Presented an introduction to the global
Liquefied Natural Gas market and implications for Alaska.
ACTION NARRATIVE
1:05:21 PM
CO-CHAIR ROBYN NIAYUQ BURKE called the House Resources Standing
Committee meeting to order at 1:05 p.m. Representatives Fields,
Rauscher, Mears, Elam, Hall, and Dibert were present at the call
to order. Representatives Coulombe and Saddler arrived as the
meeting was in progress.
^PRESENTATION(S): An Introduction to the Global Liquefied
Natural Gas Market and Implications for Alaska
PRESENTATION(S): An Introduction to the Global Liquefied Natural
Gas Market and Implications for Alaska
1:07:04 PM
CO-CHAIR BURKE announced that the only order of business would
be a presentation regarding the global Liquified Natural Gas
market (LNG) and implications for Alaska.
1:07:30 PM
NICHOLAS FULFORD, Senior Director, Liquid Natural Gas and Energy
Transition, GaffneyCline Energy Advisory, presented a PowerPoint
titled "An Introduction to the Global Liquefied Natural Gas
Market and Implications for Alaska" [hard copy included in the
committee packet]. He discussed the long-term nature of
liquefied natural gas (LNG) projects. He distinguished LNG from
liquefied petroleum gas (LPG). Mr. Fulford explained the safety
measures taken when storing and transporting LNG. He said that
currently about one-quarter of the world's primary energy
requirements come from gas and about one-eighth of those come
from LNG.
1:17:13 PM
MR. FULFORD, in response to a series of committee questions,
said that most of the energy forecasts for the next few decades
include expectations that renewable energy sources will replace
oil and coal, while gas would track with the global energy
demand. Because the global energy demand is expected to double
by 2050, he said renewables would address that growth rather
than the existing or projected gas market.
1:20:00 PM
MR. FULFORD described the processes making up the LNG supply
chain, including gas treatment, pipelines, liquefication,
storage, transportation, regasification, and delivery to
customers. He provided a brief overview of the growth in LNG
trade beginning with Alaska in 1969, until the present day. He
predicted that Qatar and the United States will be the primary
sources in the future supply of LNG. Mr. Fulford explained that
the scale of the LNG industry has increased dramatically over
the last 50 years. He provided a map of current LNG global
trade routes, highlighting Alaska's strategic location among
these routes.
1:29:53 PM
MR. FULFORD described the market turbulence of the global gas
industry over the last five years, while also emphasizing the
resiliency of the LNG industry. He said that markets have been
stabilizing since the particularly chaotic period between 2022
and 2023. He then discussed LNG demand outlook between now and
2050, emphasizing the uncertainty caused by different policy
outlooks over the same period.
1:36:09 PM
MR. FULFORD, in response to a series of committee questions,
explained that the intermittency of using renewable resources
for electricity sometimes requires the use of gas-fired power to
fill the gaps in demand. He said that the main impact of
renewables will be through the significant electrification of
emerging economies and that LNG will fill gaps in the economies
that cannot electrify as quickly. He also emphasized both the
volatility in fuel prices and in energy from renewable sources.
He explained that that UK is down to four percent gas generation
on average, but when wind and sun conditions are poor, gas
generation increases to 70 percent.
1:41:39 PM
MR. FULFORD described the supply outlook for LNG. He explained
that although the U.S. LNG industry only began in 2012, the U.S.
is currently the largest LNG exporter in the world. He said
that U.S. Gulf Coast LNG has become the price setter of the
market in recent years, and he believes it will likely remain
that way. In response to a question from Representative Fields,
Mr. Fulford said that Alaska LNG would be looking to the Pacific
for its main source of revenue. Due to its geographic location,
shipping LNG from Alaska to Europe would be cost prohibitive.
1:46:15 PM
MR. FULFORD provided predictions regarding the demand and supply
of LNG between now and 2050. He projected an oversupply of LNG
until 2030, with the potential for new demand by 2035. He
explained that there have been efforts to mitigate the intensity
of carbon dioxide in LNG because low carbon LNG is likely to
become a major driver for the future of LNG. Mr. Fulford said
that lenders are also pressuring LNG developers, many of whom
have sustainability constraints for the projects they can lend
to. He also explained that the definitions of "low carbon" or
"net zero" LNG are up to interpretation. He discussed carbon
capture and storage (CCS) and how the process could be used to
expand the population of lenders willing to lend to LNG
projects. Mr. Fulford explained where carbon emissions come
from in the LNG value chain and how they might be controlled.
1:58:13 PM
MR. FULFORD emphasized that choosing an appropriate structure is
one of the most critical features of getting a sustainable LNG
project underway. He explained the three different structures
for LNG projects: the fully integrated model, the merchant
model, and the tolling model. Mr. Fulford then discussed how
the LNG contracting model has evolved, comparing a pre-2000
model to the more recent portfolio-based model, where LNG
trading contributes more to the LNG profit stream. He then
discussed the evolution of LNG cost estimates.
2:06:13 PM
MR. FULFORD presented a study of 12 LNG projects between 2007
and 2020. He said that in general, costs for these projects
have been higher than budgeted for, yet their actual capacity is
typically higher than the performance guarantee. He then
provided a similar comparison of schedules for these 12 LNG
projects. He said that many of these projects have gone over
schedule, while also highlighting some projects that achieved
accelerated construction times.
2:09:27 PM
MR. FULFORD, in response to a series of committee questions,
explained how the tolling model provides a set rate for LNG
projects whose contracts are typically 15 to 20 years or longer.
He also described the factors that increase the risk of cost
overruns for LNG projects. Mr. Fulford, in response to a
question regarding these overruns, emphasized that the U.S. Gulf
Coast experience has been quite favorable from the point of view
of budgeting and delivering projects on time. He discussed
options for moving price risk to other steps in the LNG project
system to avoid cost overruns. He discussed the expected
returns on various types of LNG projects.
2:20:59 PM
MR. FULFORD, in response to a series of committee questions,
said that GaffneyCline is currently under contract with the
State of Alaska Legislature. He also explained that of the
three LNG models, the lowest risk model would be the one where
all parties involved have the greatest degree of alignment in
terms of their commercial goals and investments. He said,
therefore, that all three models could work for an LNG project
in Alaska.
2:24:02 PM
MR. FULFORD provided multiple scenarios to illustrate some of
the differences between the Alaska LNG project and other similar
projects. He explained that there are three sources of revenue
from LNG: upstream gas production, investment in infrastructure,
and LNG trading. He then provided four scenarios as examples of
the delivered cost of gas from LNG projects. He used these
scenarios to demonstrate the U.S. Gulf Coast LNG project's
vulnerability to Henry Hub increases and the Alaska LNG
project's vulnerability to Capital inflation. He emphasized
that Alaska LNG is very expensive, but that does not necessarily
have to translate into the cost of gas delivered.
2:30:28 PM
MR. FULFORD, in response to a series of committee questions,
further discussed the three sources of revenue from LNG that he
provided earlier. He said it would be relatively
straightforward to predict the cost of importing gas over the
next few years. He explained that GaffneyCline offers financial
modeling and general analysis over oil and gas questions. He
said that the way the State of Alaska might choose to invest in
an LNG project would be subject to evaluations, but that the
state would effectively come up with 30 percent of the total
investment, while the other 70 percent could be project-
financed. Mr. Fulford then offered options for how the State
could possibly afford that 30 percent cost.
2:36:46 PM
MR. FULFORD discussed the benefits of an Alaska LNG project,
including the oil-production implications from gas and the
federal loan guarantee. He also elaborated on the value
enhancement features of low-carbon LNG options. He then
discussed the features of enabling LNG legislation: a fiscal
stability clause, tailor-made legislation based on the project's
scale, and host country provision. He highlighted some LNG
projects that have suffered from different setbacks and
described the risk and outcome for each of these projects.
2:44:44 PM
MR. FULFORD, in response to a series of committee questions,
said that investors always look for stability and continuity and
that Alaska's decades of oil and gas investments have ebbed and
flowed. He said that investors are typically put off more by
the sequestration of assets than the ebbs and flows Alaska has
seen in its gas projects. Mr. Fulford said that the State would
probably face one of three outcomes with an LNG project: long-
term imports of LNG; the proposal to build phase 1 of the LNG
project with the pipeline; or the LNG project itself. He
emphasized that the cost of gas in south central Alaska would
decrease with an Alaska LNG project. Mr. Fulford
2:55:55 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 2:55 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Global LNG Market Implictions for AK HRES 3.5.25.pdf |
HRES 3/5/2025 1:00:00 PM |