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AKLNG pipeline project put on hold

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World Pipelines,

The Alaskan natural gas pipeline project, AKLNG, has been put on hold. The US$45 - 65 billion project was set to transport natural gas via pipeline from the North Slope to Cook Inlet.

For now, the project has been cancelled due to the current slump in gas prices, resulting in an economic struggle and bleak market outlook. Three partners in the project – Conoco Phillips, BP and ExxonMobil – have also stated that they will not continue to undertake the project given its current structure.

Yet, Darren Meznarich from ConocoPhillips, explained that returning to the project could still be on the cards: “I’m never going to say it’s dead, but … we have to look at where we are economically. It’s not ready. It’s not economic right now.”

All three companies believe that, as the pipeline struggles to compete with competitors in the global market, pursuing the project would not make sense economically.

The project’s next step – the front-end engineering and design (FEED) phase – was scheduled to commence in 2017 and cost approximately US$2 billion.

Upon discussing the FEED phase, Meznarich stated: “As I’ve discussed before with the committee, ConocoPhillips is unlikely to agree to directly participate in FEED for the project in 2017, due to the significant economic headwinds and other challenges we’ve described.”

Similarly, the other two partners agreed that the project would be not economically viable at present.

BP Alaska's Regional Manager, David VanTuyl, said: “The project that we have been pursuing struggles to compete in the global marketplace, and we’d need a project that’ll compete … We don't want to rush into the largest energy project in North America only to end up losing lots of money for all of us. So, right now is not the time to make that commitment [to enter FEED].”

Bill McMahon, ExxonMobil, expressed in a recent interview that the company must “drive down the cost of supply [in order] to be competitive.” ExxonMobil will also not be funding or participating in the FEED phase of the project.

Though it has the potential to be revived in the future, for now, the pipeline project remains cancelled.

Edited from various sources by Stephanie Roker

Sources: Kallanish Energy, Juneau Empire, Alaska Dispatch News

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