OREANDA-NEWS. December 12, 2016. Alaska governor Bill Walker has told ExxonMobil that the state does not need to provide the producer fiscal certainty on the massive Alaska LNG export project.

ExxonMobil, ConocoPhillips and BP plan by the end of the year to divest their equity in Alaska LNG. The project, with an estimated cost of at least \\$45bn, is perceived to be too expensive to develop amid low oil prices and a global LNG supply glut. Most long-term Asian LNG contracts are linked to oil prices.

The state-owned Alaska Gasline Development Corp (AGDC) plans to take sole ownership of the project by the end of the year and try to secure long-term, take-or-pay customers to get financing. The three producers would sell their stranded North Slope gas to the project if it is built and the parties agree on terms.

In a 14 October letter obtained by Argus, Walker told ExxonMobil vice president Jim Flood that since the state will take over the project, "it is not necessary to proceed with fiscal certainty" regarding the producer's potential gas sales to the project.

ExxonMobil declined to comment on the letters, saying it working to transfer ownership to the state.

Walker's office declined to comment as to whether the disagreements have been resolved. "We believe the two letters speak for themselves," Walker's office said.

Walker said fiscal certainty was only necessary to the producers when they owned a combined 75pc equity stake and would have funded that share of the construction costs.

Walker cautioned ExxonMobil to not disparage Alaska LNG, pointing out that the company is still developing LNG export projects in other parts of the world.

"Please do not take steps to thwart Alaska's ability to monetize our gas," Walker wrote. "Alaskan residents and businesses pay the highest energy costs in the nation. With a \\$3.2bn deficit, monetizing our gas is critical to Alaska's future."

Walker wrote in response to a 4 October letter that Flood sent to the governor. In that letter, also obtained by Argus, Flood said, "ExxonMobil remains committed to make our natural gas available to a viable [Alaska North Slope] project through bilateral negotiations and mutually agreed terms, including a predictable and durable fiscal agreement. We are prepared to enter these negotiations once the commercial structure of the state-led Alaska LNG project has been determined."

Walker said that when ExxonMobil first proposed in February that the state take over the project, ExxonMobil said that it was concerned about not being able to earn sufficient returns given current low oil and gas prices.

Walker acknowledged that in subsequent meetings ExxonMobil raised the issue of fiscal certainty. The state consistently explained that was no longer necessary "for a producer whose involvement would be limited to selling gas at the wellhead or shipping gas through a pipeline in which a producer has no investment."

Alaska LNG would have capacity of 20mn t/yr, equivalent to 2.5 Bcf/d (71mn m?/d) of gas.