Investor Presentaiton

Alaska has very large natural gas resources ―but no way yet to get them to market. There are enormous natural gas resources on Alaska's North Slope-comparable in energy value to Alaska's oil resources. These gas resources have not been developed because there is no pipeline to bring them to market. Over the past decade there has been a lot of talk and excitement about building a gas pipeline. There has also been a lot of debate about where the pipeline should go. The two main options are pipeline through Canada to the American midwest, or a pipeline to Valdez where the gas could be converted into liquified natural gas (LNG) and shipped to markets in Asia. But a gas pipeline is not a sure thing! Building a gas pipeline raises extremely complex economic, financial, political and legal issues. Building a gas pipeline would be extremely expensive-potentially more than $20 billion (about half the value of Alaska's Permanent Fund)-based on cost estimates that are already several years old. Because of the high cost and the great uncertainty about future natural gas prices, developing North Slope natural gas in inherently risky. Anyone taking on this risk-the gas producers, the pipeline owners, gas customers, or the State-will want a large share of the profits. This makes it hard to reach a deal to build a pipeline. A recent steep decline in US natural gas prices, due to the rapid development of Lower 48 shale gas resources, has greatly reduced the likelihood that a pipeline to the midwest could be economically viable. But exports of LNG from Alaska to Asian markets would face competition from many other potential lower-cost LNG suppliers, such as Russia, Indonesia and even the US lower 48 states. Some people argue that no gas pipeline option is economically viable: that there isn't any way to profitably develop North Slope natural gas resources at the moment. Even if a gas pipeline is built, it will probably be at least ten years before construction would start. 27 27

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