Heinze & Popp presentation to Mayor Dan Sullivan's Energy Task Force

1. In-
In-State Natural Gas
& Value Added
Manufacturing
Mayor Sullivan’s Energy Task Force
October 6, 2010 – Anchorage
Harold Heinze (ANGDA) & Bill Popp (AEDC)

2. North Slope
Gas To Market

3. Projects For Delivery of North
Slope Natural Gas Inside Alaska
Spur Gas Pipeline Off Large Inter-State Gasline
TransCanada & ExxonMobil - APP
ConocoPhillips & BP – Denali
Bullet Line -- NS To Cook Inlet
ASAP – Alaska Stand Alone Gas Pipeline Project
Alaska Gasline Development Corp (AGDC) & HB 369
All-Alaska Gas Pipeline -- NS To Valdez
Alaska Gasline Port Authority (AGPA)
Fairbanks Pipeline Company (FPC) -- NS To Fox
Trucking LNG and/or Propane From The NS

4. Large Diameter
Gas Pipeline
•48-inch diameter
•X80 grade steel
•734 miles to border
•6 compressor stations
•4.5 BCFPD capacity
•Max 6 BCFPD
•Operates at 2500 psi
Denali–Alaska Gas Pipeline
& Alaska Pipeline Project
Have Similar Designs
$35 B Price Tag

5. The “Open Season” Process
Sealed bid auction of volumetric shipping
capacity in gas pipeline
Tariff to delivery points known - cost estimate
Shipper makes a firm multi-year commitment in
a “ship or pay” contract
Creditworthiness of shippers is essential since
committed capacity is the basis of design
APP closed 07/30/10 & Denali closed 10/04/10
Results of process are public & regulators hear
complaints before certification of the project

6. 30 % Discount on Shipping Rates
“Negotiated Rates”
Not Available
In Future Offerings

7. In-
In-State Natural Gas Demand
Cook Inlet
Electric Power Generation = 100 mmscfpd
Home Heating (ENSTAR) = 100 mmscfpd average
Kenai LNG Plant Export = mmscfpd
Potential Gas Value-Added Manufacturing = ??
Interior
Golden Valley Electric = 20 mmscfpd
FNG & Doyon Military Utilities = 5 mmscfpd
Flint Hills Oil Refinery = 25 mmscfpd
Mining Operations = mmscfpd

8. ANGDA Spur Line Project

9. Spur Line
300 miles of 20- to 24-inch high pressure (2500 psi)
X-80 pipeline connecting Delta Junction to Palmer
Conditional right-of-way for Glennallen to Palmer
(150 miles across State land) issued to ANGDA in
2008
Natural Gas Supply Company (NGSC) is a gas supply
cooperative of Homer to Fairbanks electric utilities
and ANGDA-aggregated short and longer term gas
needs
ANGDA bid on behalf of NGSC members for
capacity in APP open season that closed on July 30,
2010, and Denali open season that closed on Oct 4

10. Bullet Line Direct
To Cook Inlet
•800 miles of 24-inch X80 pipe
•Includes CO2 removal & NGL
handling facilities
•Cost estimate $6B to $11B
•HB 369 set up Alaska Gasline
Development Corp (AHFC)
•EIS for ASAP project underway
•Project execution plan to
Legislature by July 2011
•GTL, LNG, & NGL projects
being studied separately

11. Bullet Line To Cook Inlet
800 miles of 24-inch X-80 pipeline direct from Prudhoe
Bay to ENSTAR 20-inch line around Cook Inlet
Includes CO2 removal and potential NGL handling facilities
HB 369 formed Alaska Gasline Development Corp
(AGDC) as a subsidiary of AHFC to continue work of the
Alaska Stand Alone Pipeline (ASAP)
Screening cost estimates completed ($6 B to $11 B) and
EIS document in the drafting phase
Project execution plan to Legislature by July 1, 2011
RFP on GTL awarded to Hatch with LNG RFP just issued

12. Port Authority – Valdez LNG
800 miles of large-diameter gas pipeline from NS to
Valdez paralleling and in proximity to TAPS oil line
All-Alaska, All-American gasline based on “updated”
Yukon Pacific right-of-way alignment, Bechtel design,
completed EIS, and Export License
Major sponsors are Fairbanks & Valdez supported by
Bechtel, Sempra, Mitsubishi & Mitsui
Review of Valdez LNG facility design is underway
Pipeline to Valdez included in current TransCanada
AGIA work (APP)

13. Interior Gasline From NS
Energia Cura announced a non-binding open season
in late August 2010, to close on October 1, 2010
Fairbanks Pipeline Company project is a 10-inch
pipeline from Prudhoe Bay to Fox
Secondary transmission network of 5-inch high-
pressure, steel-coiled flow lines emanating from Fox
terminus
Currently seeking nominations of volume & delivery
locations along the corridor extending to Eielson AFB
Few details released in support of $500 million cost

14. Trucking LNG From North Slope
In early 2008 Fairbanks Natural Gas (FNG) proposed
constructing a 25 mmscfpd LNG plant at Prudhoe Bay,
with the LNG to be trucked to Fairbanks utilities with
Golden Valley Electric (GVEA) as anchor gas user
Interior Alaska uses fuel oil and distillate at a
comparative cost over $20/mmbtu
ExxonMobil will be providing the feed gas under
contract (not publicly filed)
The Alaska Gasline Port Authority (AGPA) has made a
deal to acquire FNG for $64 million and is currently
arranging a $250 million financing for LNG plant,
storage, & trucks

15. In-
In-State Gas Pipeline Projects
Cost Flowrate Tariff
($ million) (mmscfpd) ($/mmbtu)
Mainline In Alaska 22,600 4,500 1.88
Spur Line
Delta Junction 1,500 250 3.50
Glennallen 750 250 1.75
Bullet Line 6,400 250 14.70
Mainline To Valdez
Pipe To Valdez 22,300 3,000 2.56
LNG Plant 10,000 2,750
NS To Fairbanks 500 33 9.00
Truck LNG 250 25 6.00
Mainline to Alberta 36,000 4,500 2.78
Includes Gas Conditioning --- US $ in 2009

16. Project Comparison Overview
The “gas conditioning” facility to reduce CO2 to meet pipeline
specifications is very expensive (40- to 50-% of the total project
cost) and sets the critical path timeline
Mainline proposals have very low tariffs because of economies
of scale and sponsors offering incentives to anchor shippers
(approximately 30% discount)
NS gas is rich in NGL’s and offer a major In-State opportunity
for manufacturing
C2 Ethane 7.2% 200,000 bpd
C3 Propane 3.7% 100,000 bpd
C4 Butane 0.7% 25,000 bpd
Gas value-added manufacturing plants cost several $B and the
investment decision would have to be made simultaneous to a
gas supply pipeline sanction decision

17. In-
In-State Gas Delivery Costs
Cost of Service To Deliver NS Gas
Fairbanks Valdez Cook Inlet
($/mmbtu) ($/mmbtu) ($/mmbtu)
Mainline To Alberta 1.65
Spur Off At Delta Junction 5.15 5.15
Bullet Line To Cook Inlet 12.00 14.70
Mainline To Valdez LNG 2.40 2.58
Spur Off At Glennallen 4.15
Small Line - NS To Fairbanks 9.00
Truck LNG From NS 6.00
Tariff From NS to Alberta = $ 2.78 /mmbtu
Includes Gas Conditioning --- US $ in 2009

18. Project Links on the Web
www.angda.state.ak.us
Denali – the Alaska Gas Pipeline Alaska Pipeline Project
www.denalipipeline.com www.thealaskapipelineproject.com
Alaska Gasline Port Authority Alaska Gasline Development Corporation
www.allalaskagasline.com www.gasline.us
Fairbanks Natural Gas Energia Cura
www.fngas.com www.energiacura.com

19. North Slope Propane Distribution
ANGDA has proposed the construction of a propane
separation facility and wholesale propane outlet on the
North Slope
A 2,000 bpd (propane) facility to process Prudhoe Bay
residual re-injection gas is estimated to cost in excess of
$200 million
Propane distribution from the North Slope would involve
trucking & barging (including use of iso-containers) to
service rural, river, and maritime communities and
industrial plants
Prudhoe Bay Unit owners are considering modifications
to existing facilities for additional propane recovery

21. ISO-Container
Propane Tank

22. LPG’s & NGL’s in North Slope Pipeline
North Slope Gas Pipeline Flow --- 4.5 BCFPD
Thousand
Mole
Component Bbls/Day Tonnes Per
Percent
Year
C2 Ethane 7.23 206,000 4,250
C3 Propane 3.76 110,250 3,250
C4 Butane 0.76 26,250 900
C5+ Pentanes 0.03 1,250 45
Composition Based on ANGTS – Alaska ROW Application (June 1, 2004) – Page 9 of 34

23. Alaska Gas & NGL Potential Uses
NH3/Urea
Plant
Dry Gas LNG Plant
Export
(Methane)
GTL Plant
In-State
Enstar LDC Use
Ethane Ethylene Plant Polyethylene
Export
Plants
In-State
Use
Propane Propane Tank
Farm
Export
Butane Tank
Butanes Farm

24. Value Added Manufacturing
Acceptable Gas Prices in Constant $
10
Maximum Gas Price $/MMBtu
9
Japan
8
LNG
7
6 Market Prices in South Central Alaska (2015-2035)
PetroChem (Ethane)
5 GTL to Japan
LPG (Propane)
4
West
3 Fertilizer GTL
Coast
2 LNG
1
0 100 200 300 400 500 600 700 800 900 1000
Quantity MMcfd

25. Alaska Gas & NGL Potential Uses
Source Separation Product Use
NGL Separator Plant : NH3/Urea
Plant
1) “Raw” stream Dry Gas LNG Plant Export
Spur Pipeline (Methane)
with GTL Plant?
2) NGL 2) Methane
North Slope
Natural Gas In-State
Enstar Pipeline Use
3) De-ethanizer
4) De-propaneizer Polyethylene
Export
(& MEG) Plants
5) De-butaninzer
Ethane Ethylene Plant
In-State
Propane Tank Use
Propane
Farm
Butane Tank Export
Butanes Farm
Pentane Tank Local
Pentane Farm Refinery

26. Petrochemical Critical Success Factors
Every Petrochemical Project Needs:
Low Cost of Production
Driven by availability & cost of feedstocks & energy
Low Logistics Costs for RM’s & Finished Products
Proximity to feedstocks and end use markets
Infrastructure availability and quality
Low Capital Investment Versus Other Locations
includes site & logistics capital
Channel to Market (Commercial Strengths)
Good, Stable Investment Climate
Taxes, cycle timing, regulations, incentives, etc.

27. Alaskan Natural Gas & Ethane Prices
Natural Gas price in Alberta is North Slope Prices:
NG = $5.51
usually lower than the Chicago Ethane = $6.01
price, based on the cost of Differential to USGC
pipeline shipment, since Site comparison Table here
NG = (- $2.57)
Alberta is long on gas, (as is the Ethane = (-$5.83)
US Gulf Coast).
North Slope gas and ethane
will be priced based on their
netback after pipeline
Cook Inlet Prices:
shipments to Alberta while NG = $6.81 Alberta Prices:
Cook Inlet prices will be the Ethane = $7.31 NG = $7.06
North Slope price plus tariff. Differential vs USGC
Ethane = $7.56
Ethane prices in Alberta are NG = (- $1.17) Differential to USGC
Ethane = (-$4.53)
based on its BTU value in its NG = (- $0.92)
Ethane = (-$4.28)
only alternative use, as natural
gas shipped to the US.
Chicago Price:
However, US ethane has to NG = $7.92
compete against crude oil NG Diff to USGC
= (- $0.06)
based cracker feedstocks on
the USGC, so its price is
higher than its BTU value there
when crude oil is high relative
to gas (as it is now).
Ethane at Cook Inlet will have
a greater discount to the
USGC than natural gas will. Note: The 2018 prices and
differentials to the USGC
shown here are in Constant USGC Prices:
2009 $/ MMBTU. NG = $7.98
Ethane = $11.84

31. Possible Plant Sites at Cook Inlet
Port MacKenzie near
Anchorage (Greenfield Site)
Fire Island near Anchorage
(Greenfield Site)
Tyonek (Greenfield Site)
Nikiski on the Kenai Peninsula
(Brownfield Site)
All except Fire Island are on or
within a few miles of the
existing natural gas pipeline
infrastructure.

32. Port MacKenzie Site Attributes
Port MacKenzie is opposite
the port of Anchorage on
Cook Inlet, with its own deep
water port and surface road
connections to Anchorage and
the communities to the north
of it.
A rail spur is to be built in the
next couple of years,
connecting it to the container
ship port at Anchorage and
the rail barge port at Whittier,
which provides weekly rail
service to the US West coast.
• The site has good access to power, and is located at a central location within the
natural gas pipeline grid, although the pipeline is 9 mile from the plant site.
• An improved surface road is also being built into the site, which is within
commuting distance of the suburban communities north of Anchorage, where
large numbers of well trained former military and oil industry workers live.

33. Nikiski Site Attributes
Nikiski is a brownfield site, with
several existing gas fed
industrial plants:
LNG export plant built in 1969
that is still operating, with its
licensed recently renewed
through 2011.
Agrium Ammonia/Urea plant,
built in 1968, which was shut
down in 2007 due to lack of
affordable local natural gas.
BP Gas to Liquids pilot plant is
still in operation.
A Tesoro refinery, built here in 1969, is still the most sophisticated one in Alaska
as the others are crude topping facilities. There is also a former Chevron
refinery site there, which was closed down years ago.
This area was chosen by Dow Chemical for a potential petrochemical plant in
the 1980’s, but the land was never purchased by them, and the project died.
The site has a cogeneration power plant that doesn’t utilize the steam section.
It also has significant natural gas infrastruture and a port facility, with surface
roads to Anchorage, but no railroad.

34. Logistics to Asia & US West Coast
Cook Inlet has advantaged logistics to the US West
Coast and Asia due to its location in the middle of the
great circle route, with the potential for additional
backhaul freight rate reductions to Asia.
>3,000 vessel passages/ year

35. Channel to Market Issues
An Asian company would be considered a domestic
supplier in the US market if it has production capacity in
Alaska, which could help in marketing to customers and in
its dealings with the government.
An Alaskan plant would not only have duty free access to
the entire US market, but would also be able to participate
in the North American Free Trade Agreement with
Canada and Mexico, as well.
The first mover on petrochemical investment in Alaska will
understand the local situation better than latecomers will,
and is better positioned for additional future
petrochemical and downstream investments.
Partnering with or buying a US company could facilitate
market development activities for an Alaskan plant’s
owner (IPIC bought Nova, and SABIC bought GE Plastics).

36. Investment Climate Issues
Political stability of the US government and tax system.
A weak dollar could favor a US investment that is based
on domestic capital, operating costs and raw materials.
Environmental permitting can be difficult, but this will be
eased somewhat by sharing work done for the pipeline.
Cycle timing is favorable for manufacturers.The Open
Season negotiations are taking place at the bottom of the
chemical cycle trough occurring in 2010. Investment in
productive assets now is a way to use funds that might be
underperforming in financial investments.
Alaska will be an ally in this process. This is not an
acquisition of an existing company, but rather the
establishment of a new presence/company in
Alaska. Alaska will strongly support that endeavor.