Image result for US and Japan flags imagePlease note that we have always supported creation of an economic, Alaska North Slope gas monetization project.  

We have also observed that continuing efforts by politicians to “do it my way” over the last 45 years have been costly, wasteful efforts to master the free market — always unsuccessfully.

We are particularly concerned that Alaska’s governor has an unrealistic fixation on government control over the “means” of energy production and transportation — regardless of market supply/demand realities.  We hope he studies the history of Venezuela and Argentina and Brazil before moving further into that socialism direction.

Today we find ourselves concerned that this Alaska governor lets the shiney LNG object distract him from the “clear and present danger” resulting from Alaska’s current fiscal crisis.

Even a free market controlled LNG project, completed on schedule, could not solve Alaska’s fiscal crisis before the state’s multi-billion dollar annual deficit sucks available savings dry within another two years, at most.  Only right-sizing Alaska’s out-of-control government spending could return the state to economic sustainability.

We understand that confronting a domestic fiscal crisis challenge is less appealing to a politician than international travel, socializing with foreign dignitaries and establishing a beachhead marketing office in Houston for an economically unproven project.

But appealing or not, slogging through the mud to conquer the 49th state’s fiscal crisis is the only way to properly protect its future and prepare it for a future LNG project– when the time is right.

And today — a time of low LNG prices, high project costs, and an economic crisis at home — is  not the time for that shiny object which is the future Alaska North Slope gas monetization project.  -dh

During a year when Japan is negotiating historically low prices for LNG, Alaska’s governor takes a costly trip to promote one of the most expensive sources of LNG in the world: from Alaska’s North Slope.  (See our comments on the story below, in red).  -dh

Japan Times.

Japan, the world’s biggest buyer of LNG, paid the lowest price in about 11 years for the fuel last month amid a global oversupply.

The average price of LNG shipments into the country was about $6.32 per million British thermal units in April, the least since August 2005, according to Bloomberg calculations based on preliminary data from the Finance Ministry.

Prices are expected to rebound in the coming months as crude values have surged, according to Junzo Tamamizu, managing partner at Clavis Energy Partners LLC.   NOT NECESSARILY, ACCORDING TO IEA, HERE.

“With crude prices bottoming between January and February, LNG prices are set to rebound,” Tamamizu said. As Asian spot LNG prices are cheaper, “buyers would likely work harder to renegotiate with suppliers” to lower prices and get more flexibility, Tamamizu said.

Asia spot LNG fell 10 cents to $4.35/mmBtu from a week earlier, New York-based Energy Intelligence said on the website of its World Gas Intelligence publication on May 18. SLInG weekly spot price gained 1.5 percent to $4.36/mmBtu, according to an assessment by Singapore Exchange Ltd. on May 16.

Governor’s Press Release:

Bill Walker 11-10-09 NGP file photo by Dave HarbourIn advance of his trip to Asia to meet with parties interested in Alaska LNG, Governor Bill Walker (NGP file photo) today reflected positively on Japanese interest in potential exports of the resource.

On Friday, Governor Walker, Lt. Governor Byron Mallott, Alaska Gasline Development Corporation (AGDC) President Keith Meyer, and other key members of the administration met with officials from Japan’s Ministry of Economy, Trade, & Industry (METI), and the Japan Oil, Gas, and Metals National Corporation (JOGMEC) to discuss the recent shift towards a state-led LNG project, and other resource opportunities in Alaska. METI’s mission is to develop the Japanese economy and industry, while JOGMEC exists to secure a stable supply of oil & gas, mineral resources, and coal & geothermal energy.  (Alaska and Japan have not yet shown they can agree on a “secure, stable supply of oil & gas” from the Alaska North Slope.  The Administration lacks legislative support for a 100% government owned LNG project.  Its LNG project is mired in uncertainty: high Arctic transportation, capital, labor costs; lack of producer support; tendency of Asian LNG buyers to move away from long term take-or-pay contracts that support capital financing; Alaska’s fiscal crisis which bodes badly for tax (hence, project) stability, etc.  Under the currently uncertain circumstances, we believe the most Alaska’s peripatetic governor can achieve from his international travel is another in a long history of “Memoranda of Understanding”.  Alaskans know that in the formal business culture of Japan, courtesy to guests is traditional.  Of course, the ever gracious hosts will always tell a traveling governor — as they told a traveling Alaska Port Authority lawyer named Bill Walker — that they are “interested” in Alaskan gas.  “Interest” is not the same as signatures on a long-term contract that supports financing of one of the most expensive LNG projects ever conceived…especially in a low-price era.)

“Alaska’s relationship with Japan is a special one,” Governor Walker said. (The news release did not elaborate on what is so “special” about the relationship — perhaps because of the small, Cook Inlet LNG plant exports to Japan.  After all, Japan has countless business relationships all over the world that politicians representing those venues would also consider “special”.)  “This meeting further underscored not only Japanese interest in Alaska natural gas, but also the general optimism that exists across the Pacific for our state to enter the international market. Japan is the largest LNG-buying nation in the world, and their interest in Alaska is very encouraging.”

The Juneau meeting came as the Governor prepared for an international trip to Singapore and South Korea to follow-up on previous interest (The news did not explain what “previous interest” was, nor why previous interest justifies absence from Alaska during its current fiscal crisis.  A speech at a trade show is not more persuasive than the fact that Alaska is not yet ready to negotiate or offer anything of real value in an LNG scheme, at this time.) in Alaska LNG, and as the AK LNG project transitions to state leadership.  (Many who have followed Alaska’s pipe dreams over the decades conclude that in today’s economic environment now is not the time for anyone to be acquiring ownership of a risky, unproven, world-class LNG project.  Accordingly, the very word “transitions” signals to Asian markets that Alaska is not yet ready to bargain and as yet has nothing of significant value to offer.  We believe the Governor’s credibility and Alaska’s reputation as an investment climate are not are not very well positioned to be enhanced by this trip.)

“In addition to the gasline and LNG project, we discussed JOGMEC and METI’s technological advancements in CO2 capture and sequestration, and the small-scale distribution of LNG into remote markets, both of which could be very useful in Alaska’s overall development of the project,” AGDC President Keith Meyer said.  (So here, Alaska’s gas czar and governor are hinting that Alaska might use public funds — if in a fiscal crisis it could convince a compliant Legislature to acquiesce — to purchase Japanese systems to distribute LNG within the state and support CO2 technology.  Is this more socialism on the horizon for Alaska: more unaffordable government subsidies and control over intra-state LNG distribution and Prudhoe Bay CO2 technology as well?)

Along with the Governor, Lt. Governor, and AGDC President, Department of Natural Resources (DNR) Commissioner Andy Mack, Department of Revenue (DOR) Commissioner Randy Hoffbeck, and policy analyst Ed King participated in the discussion.  METI representatives included Oil and Gas Division Director Yuki Sadamitsu, and Assistant Director Takayuki Kawamura; JOGMEC was represented by Business Strategy Department Director General Hajime Wakuda, and Koji Hoshi, Deputy Director of JOGMEC’s Washington Office.