General Dynamics Corp., vigorously promoting its proposal for a $20 billion fleet of submarine tankers to carry liquefied natural gas from Arctic fields, said today it has opened negotiations with potential partners in West Germany and has been encouraged by Reagan administration officials.
Discussions with "every major West German shipbuilder" and other German industrial firms began in October and will resume next week, according to James J. Murphy, General Dynamics vice president for marketing. The object is to establish a joint venture for constructing a gas liquefaction plant in Alaska, a fleet of submarine tankers to sail beneath the polar ice, and a discharge terminal at the port of Wilhelmshaven.
Murphy acknowledged that the plan faces massive difficulties in financing construction of the ships and in marketing the gas, but he said General Dynamics is committed to it. "This is a project that can be accomplished, and it can bring all that energy down from the Arctic," he said.
The system "will be developed" by the end of the century, even if a planned $40 billion Alaska pipeline is constructed to link the gas fields to the lower 48 states, Murphy said. General Dynamics is focusing on long-term markets in Europe, and there is enough gas in the Arctic to feed both transport networks, he added.
General Dynamics, which through its Electric Boat division is among the world's leaders in both submarine and LNG tanker technology, has been studying the possibility of combining the two for several years. Spencer Reitz, deputy general manager of Electric Boat, said there is no technical obstacle to building a fleet of 28 giant submarines, each more than 1,400 feet long, to provide year-round, under-ice transport of the gas.
The company's immediate problem appears to be credibility. At a press conference today, Murphy and Reitz faced reporters whose responses hovered between skepticism and incredulity, but Murphy said officials in Washington and business contacts in Germany who had been briefed on the proposal had agreed that it is feasible.
Murphy declined to name the West German firms to which General Dynamics has been talking. West Germany is virtually committed to buying natural gas from the Soviet Union and is expected to sign a contract for a pipeline from Siberia when Soviet President Leonid Brezhnev visits West Germany next week.
Murphy said, however, and German officials confirmed, that Germany also would consider other sources of gas to supplement its Soviet supplies.
Officials at the State Department said they had encouraged General Dynamics to present its proposal to the Germans because the United States wants to limit European dependence upon Soviet supplies. "We are trying to convince the Europeans that there are alternatives to Soviet gas," one source said. "They could rethink their position, and there are some signs that at least the Germans are going to toughen their bargaining position on price."
A color film promoting the General Dynamics plan was shown at the press conference. It stresses that the submarine fleet would cost less to build than the proposed pipeline. But Congress apparently is going to approve legislation that would make it easier for backers of the pipeline to obtain financing, and Murphy's presentation today stressed European markets, not shipment to the United States in competition with the pipeline or as a replacement for it.
Murphy acknowledged that General Dynamics' financing plans presume that U. S. Maritime Administration loan guarantees and construction subsidy funds would be available. The Reagan administration, however, has eliminated ship construction subsidies and has reduced loan-guarantee commitments.