Alaska is doing all it can to get a game-changing natural gas export project started.

The state recently announced that it has agreed to join ExxonMobil (NYSE:XOM)ConocoPhillips (NYSE:COP)TransCanada (NYSE:TRP), and BP (NYSE:BP) in investing in a natural gas project. In return for investing as much as $5.75 billion and giving tax rebates worth another $5.5 billion to TransCanada, Alaska will get as much as 25% of a natural gas export project that includes an 800-mile pipeline from Alaska's North Slope, a gas processing plant, and a liquefaction facility in the Kenai Peninsula. 

The export plant would have the capacity to export the LNG equivalent of 2 billion to 2.4 billion cubic feet of natural gas a day. 

Alaska needs this project
Normally states don't buy stakes in projects. Because of the numbers involved in this deal, however, the Alaskan government is doing all it can to push it through.

After agreeing on the basic framework of the deal with the oil companies involved, Alaska Governor Sean Parnell recently asked the state legislature to approve the deal so that all the parties involved were aligned. Joe Balash, Alaska Department of Natural Resources' commissioner, said that the project had a good shot at proceeding.

If it does start, the project would be a great boon for Alaska's economy, which only has 731,000 people. 

The total investment for the project could reach anywhere from $45 billion to as high as $65 billion. 

Alaska needs some investment. Its workhorse field, Prudhoe Bay, used to produce 1.6 million barrels a day. Now it produces less than 300,000 barrels a day. 

By building an LNG plant, Alaska can unlock some of its unrealized natural gas potential. Much of Alaska's natural gas is extracted during oil production, but the state has been unable to take advantage of the resource. It doesn't use much natural gas domestically, and a pipeline built to the lower 48 states would be uneconomical. As a result, natural gas is reinjected into existing oil fields unused. 

By building an LNG plant to export natural gas to Asia, Alaska can take advantage of its natural gas resource while stimulating the economy.

The bottom line
Because the LNG plant will not begin shipping gas until 2021, the project's benefits will not accrue to oil and gas companies right away.

When it does begin, however, the project will be great a boon for those companies.

The U.S. Geological Survey estimates that Alaska's North Slope contains more than 35 trillion cubic feet of discovered natural gas and an additional 221 trillion feet of natural gas in onshore and offshore Arctic parts.  

By building an LNG plant, that enormous resource can be exported to Asia where the current spot price of LNG is $18/mmBTU versus $4/mmBTU at Henry Hub.  

Besides project delay risks, the natural gas export project is relatively low-risk because Alaska is geopolitically stable, and the companies backing the project can generally lock in favorable long-term natural gas contracts from Asian customers. If the project goes through, it will be a win-win for everyone involved.