The North Slope in Alaska has huge potential for gas development, and the state is looking for a way to benefit from that alongside private corporations.

The most promising route to accomplishing that is the Alaska LNG project, said Audie Setters, executive LNG supply manager with the Alaska Department of Natural Resources.

The Alaska LNG project is a partnership between BP Plc, ExxonMobil Corp., ConocoPhillips and Alaska that aims to take advantage of undeveloped North Slope natural gas. Currently, oil producers working in Prudhoe Bay in the North Slope area put recovered CO2 back into the reservoir because there is no cost-effective way to transport or treat it. The Prudhoe Bay area, combined with the nearby Point Thompson Field, contain an estimated 35 trillion cubic feet of natural gas. The project aims to utilize that by building a gas treatment facility in the area.

The project will include “three 6 million-tonne LNG trains, so we’ll have the capacity of about 18 [million] to 20 million tonnes of LNG when that’s all said and done,” Setters told attendees at Hart Energy’s recent North American LNG Exports conference in Houston. “We’ll have three storage tanks and we’ll have two LNG berths.”

Additionally, an 800-mile, 42-inch high-pressure pipeline with eight compression stations is planned to carry LNG away from the plant. The project also comes with a hefty price tag—an estimated $45 billion to $65 billion—much more than a similar project would run in the Lower 48. The price doesn’t worry Setters, though.

“Buyers are always going to require long-term contracts, and we would require long-term contracts,” he said. “And just because you build capacity in the Lower 48 doesn't mean any gas is going to go through it. So that remains to be seen.”

Setters emphasized that because the state is a project partner, there would be a special interest in avoiding price volatility.

“The state is approaching the project conservatively. We’re going to have long-term contracts, 15- to 20-year contracts,” he said. “[In] a project like this with a state selling its own share, we need to mitigate the downside.”

However, the project still has a long way to go before it enters into any serious conversations with buyers about contractual commitments. With a FEED decision not expected until early 2016 and a final investment decision (FID) not expected until 2018, other LNG projects are far ahead in terms of timing. According to Setters, some projects around Kitimat, British Columbia, have already entered the FEED stage. In other ways, though, the Alaska LNG project has the edge in reaching a FID.

“I would say that in terms of native title issues, we’re in a better place, just because we’ve worked through a lot of the native title issues” during the last 40 years, Setters said.

The project also benefits from its proximity to conventional reservoirs. “We’re not having to drill wells for 20 years to support production for the LNG liquefaction projects,” he said. “All the gas is in conventional reservoirs—all the gas is there. We wouldn't be producing it.”

Other major issues many LNG projects face are backlash from environmental groups and problems when dealing with regulatory agencies, but the Alaska LNG project shouldn’t confront those issues, either. According to Setters, the new project will be “living within the footprint of the existing infrastructure that’s there” and won’t cause a significant impact on the environment. Then, because the state is a partner in the project, supportive state officials and national representatives have indicated they plan to extend “enough support to keep this at the top of the regulatory agenda, and every indication is that the DOE [U.S. Department of Energy] and FERC [Federal Energy Regulatory Commission] are very, very much behind the project.”

The only real issue, Setters said, is the same facing every LNG project in development today.

“At the end of the day, to get an LNG project off the ground in this environment, it’s going to come down to cost, cost, cost. We’ve got to put something together that is competitive in this market, and we’ve got to be one of the leading low-cost producers. So we think we have the fiscal structure, we think we have the resource, the size, the scale and the proximity to the markets in Asia to make this a very competitive project.”