Today’s Key Takeaways: Where will all the AK oil go? Japan looks to Alaska for long-term LNG supply. A look at Greenland’s untapped mineral resources.
OIL:
Take It On The Run – Alaskan Crude Oil Production Set To Increase, But Where Will It All Go?
Lisa Schidler, RBN Energy, January 15, 2025
After a long decline, crude oil production on Alaska’s North Slope is poised to increase, and it’s possible that by the early 2030s production could return to levels not seen since the turn of the century. It’s an exciting development for the 49th state, but where will all that oil go? With refining capacity on the decline in California, which has typically handled a lot of Alaska North Slope (ANS) crude, it’s not an easy answer. In today’s RBN blog, we’ll discuss the locations where ANS oil production could land — one of the many essential topics covered in our upcoming Future of Fuels report.
As we discussed in our first blog in this mini-series, Holding Out for a Hero, ANS crude oil production has been sliding for decades but is poised to rebound because of two long-planned projects — Pikka and Willow — which are slated to start in 2026 and 2029, respectively, and begin a new ramp up in Alaskan oil production. Although existing fields will continue to experience natural declines, new projects such as ConocoPhillips’s recently started Nuna drill site (which will add 20 Mb/d) will begin to boost volumes slightly this year. As a result, we expect that 2024 will be the nadir for Alaskan production (at least for the next two decades). The much larger Pikka project, due to start in early 2026, will push production to 490 Mb/d by 2028 (a gain of more than 20% from current levels). With the even larger Willow project starting up in 2029, we project Alaskan production will reach 660 Mb/d by 2032 as Willow ramps up to full operation.
The vast majority of ANS crude is transported south from Prudhoe Bay on the Trans-Alaska Pipeline System (TAPS) to Valdez, a port on the southern coast of Alaska. Small volumes are processed at two small refineries (owned by ConocoPhillips and Hilcorp) in Prudhoe Bay — combined capacity 24 Mb/d — that produce fuels for consumption in the oil fields, and some crude is removed from TAPS at Fairbanks to supply Petro Star’s 24-Mb/d refinery there. At Valdez, crude is either piped to Petro Star’s local refinery (capacity 60 Mb/d) or loaded onto tankers on an irregular basis for passage to a variety of customers, including Alaska’s largest refinery (Marathon Petroleum’s 72-Mb/d Kenai facility) and refineries in Hawaii and Asia (mostly China). And — most important by far — refineries in Washington state and California receive about 80% of the ANS barrels.
In recent years, refineries in California have been shutting down — a well-discussed topic in the RBN blogosphere — because of the declining economic environment for petroleum refining in the state, a situation substantially caused by California’s ambitious efforts to decarbonize its economy. [That’s another topic we’ve discussed at great length, most recently in I Asked For Water (She Brought Me Gasoline).] Weak refining margins, rising regulatory compliance costs, softening demand for gasoline and the push for lower-carbon alternatives like batteries and renewable diesel have each contributed to a steady erosion in California’s refining capacity over the past few years.
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GAS:
Japan seeks long-term LNG supply from Alaska as $44 billion project moves forward
John Benny, The National, January 15, 2025
Alaska’s governor is meeting with “a number of business and investment entities” in the UAE
Japan is interested in securing a long-term liquefied natural gas (LNG) supply from the US state of Alaska, which is moving forward with a long-delayed $44 billion LNG project, a senior official said.
The Alaska LNG project, which has a decades-long history of failed attempts to secure funding and LNG buyers, recently took a big step forward. Last week, the Houston energy company Glenfarne signed a deal with the state-owned Alaska Gasline Development to develop the project, which aims to start delivering natural gas in 2031, with LNG exports commencing shortly after.
“In our discussions with Japanese [officials], they’re very interested in securing a long-term supply like they had before, and we’re talking enormous amounts of gas … trillions of cubic feet on the slope,” said Mike Dunleavy, Alaska’s governor. A 1,300km pipeline is set to transport up to 3.3 billion cubic feet of gas per day from Alaska’s gas-rich North Slope to local communities and an export terminal located south of Anchorage, Alaska’s capital city.
“It’s an eight-day shipping time from Anchorage to Tokyo in uncontested waters in the North Pacific, so they’re interested. Our South Korean friends are interested as well,” Mr Dunleavy told The National on the sidelines of the Abu Dhabi Sustainability Week. “I think you’re going to be seeing some very interesting announcements over the next several months.”
LNG demand
Japan and Alaska have a long history of LNG co-operation. In the late 1960s, Japan became the first Asian country to import LNG, and some of the initial shipments came from America’s 49th state. “Alaska pioneered LNG export for the Western Hemisphere. In 1969, we had the first LNG export plant, so we were sending gas to Japan for almost 50 years out of [the] Cook Inlet gasfield,” Mr Dunleavy said.
Japan, which is the world’s fourth-largest economy and second-biggest LNG importer, has been securing long-term LNG contracts from allies such as the US and Australia. However, the country still depends on Russia for around 9 per cent of its LNG supply, most of which is linked to long-term contracts at the Sakhalin-2 project, operated by the state-run energy company Gazprom.
Japan has also signed energy deals with major players in the Middle East, including UAE’s Adnoc. Last year, Adnoc signed an initial agreement with Osaka Gas, one of the largest utility companies in Japan, for the delivery of up to 800,000 tonnes per annum of LNG. Global demand for the fuel is projected to rise by more than 50 per cent by 2040, as industrial coal-to-gas switching gathers pace in China and South Asian and South-East Asian countries, Shell said in its LNG outlook report last year.
LNG trade worldwide reached a record high in 2022, when Russia’s invasion of Ukraine triggered a scramble for the fuel in Europe. However, agencies and experts expect the LNG market to go into a glut in the second half of the decade as new supply comes online from the US and Qatar – two of the largest suppliers.
More drilling
If oil and gas companies see a “clear runway” under the incoming Trump administration, there will be more bids for drilling leases in the state, Mr Dunleavy said. Drilling is largely restricted in the Arctic National Wildlife Refuge, a vast protected area in north-eastern Alaska.
The refuge’s coastal area contains 11.8 billion barrels of recoverable oil, according to government data. The federal government had planned to auction off about 400,000 acres of the refuge on January 9, but it did not receive any expressions of interest from energy companies by the January 6 deadline.
“We have large conventional fields [and the] infrastructure in place,” Mr Dunleavy said. “We believe if businesses see a clear runway under the Trump administration, I think you’ll see more leases bid on, more leases sold, and work start happening.”
Gulf partnership
Mr Dunleavy is meeting with “a number of business and investment entities” in the UAE as he seeks partnerships in sectors ranging from energy and mining to data centres.
“Given what’s happened recently, we’re going to need two to three times as much energy for data farms, computing, [and] for electrifying the entire world,” Mr Dunleavy said. “Alaska … is going to have a prominent role over the next several decades. We have enormous gas reserves, oil reserves, [and] we have 49 of the 50 world’s critical minerals,” he added.
Alaska possesses a wealth of critical minerals essential for the US economy and the global energy transition. These include several listed by the US Geological Survey, such as antimony, cobalt, graphite, lithium, nickel, tin, tungsten, and platinum. Furthermore, Alaska has abundant copper reserves, a vital component for renewable energy projects.
Alaska could benefit from a push towards domestic onshoring of critical mineral supply chains under the incoming Trump administration, Mr Dunleavy said. The Republican governor expects the US president-elect to sign a “flurry of executive orders,” possibly on his first day in the office, “reasserting the ability for the US [as well as] the individual states, to market their minerals, rare earths, gas and oil at levels that we may not have seen in some time.”
MINING:
Factbox: Greenland’s rich but largely untapped mineral resources
Reuters/Mining.Com, January 13, 2205
US President-elect Donald Trump last week reiterated his interest in taking control of Greenland, a semi-autonomous territory of Denmark, which could be useful for the US because of its strategic location and rich mineral resources.
A 2023 survey showed that 25 of 34 minerals deemed “critical raw materials” by the European Commission were found in Greenland.
The extraction of oil and natural gas is banned in Greenland for environmental reasons, and development of its mining sector has been snarled in red tape and opposition from indigenous people.
Read more about the details of Greenland’s main mineral deposits, based on data from Greenland’s Mineral Resources Authority: