Alaskan Governor Calls for Fresh Focus on Domestic Market’s Demand for Natural Gas

After two decades of unsuccessful efforts to sell North Slope natural gas to Asian markets, Alaskans should shift their focus to the Lower 48 states, Gov. Tony Knowles said Tuesday.

The U.S. domestic market for natural gas is, “for the first time in a generation,” ripe for Alaska supplies, Knowles said in speeches to business groups in Anchorage and Fairbanks.

Demand is “skyrocketing” and prices of $4.80 per thousand cubic feet are more than twice the 15-year average, the Democratic governor said.

“That’s where Alaska comes in,” he said. “Despite our distance from domestic markets, Alaska’s natural gas is more economic now than ever. If prices in mid-America stabilize at around $3 per [million cubic feet], moving Alaska’s natural gas to those markets would be economic.”

Development of a gas-to-liquids technology, which would allow shipment of synthetic crude in the existing trans-Alaska oil pipeline, might also make it possible to sell North Slope natural gas in the Lower 48, Knowles said.

The North Slope holds known gas reserves of 35 trillion cubic feet, and some experts estimate potential reserves at three times that amount, Knowles said.

But distance from markets and the high cost of building a gas line system have so far precluded development. For now, the North Slope’s natural gas is mostly re-injected into reservoirs to build pressure and enhance oil recovery.

For years, Alaska officials have envisioned a gas pipeline paralleling the trans-Alaska oil pipeline, with a liquefaction plant in Valdez to ship liquefied natural gas to Japan, Korea, Taiwan and China.

“People are thinking now there’s a window of opportunity to market gas in the Lower 48 that didn’t exist before,” said Matt Berman, an economist at the University of Alaska Anchorage.