Anchorage's city-owned Municipal Light & Power and Chugach Electric Association, the two largest Southcentral Alaska electric utilities and Enstar Natural Gas, the regional gas utility, are together studying the possibility of LNG imports after 2013, when regional gas production is forecasted to fall short of local demand.
Studies mainly center on the cost of facilities needed to regasify and store any LNG to be imported.
One company that has expressed interest in supplying LNG is Shell, which now ships LNG to Asia and North American markets from Sakhalin Island, Russia, said Jim Posey, MP&Ls general manager.
Southcentral Alaska has enjoyed ample and low-cost local gas supplies since large discoveries were made in the region in the late 1960s and early 1970s. But reserves are being depleted and production is declining.
"Unless someone makes a big gas discovery very quickly, were going to need gas from somewhere else," Posey said.
A state of Alaska team is doing engineering and cost estimates for a 24-inch pipeline to bring North Slope gas to southern Alaska, but it would be 2018 or 2020 before it could be built and operating, they concede.
ConocoPhillips and Marathon Oil, which own the LNG plant, were recently given a two-year extension of an LNG export license by the US Department of Energy. The new expiration date is March 2013. The plant is supplied with gas from ConocoPhillips' North Cook Inlet field and by Marathon from several of its Kenai Peninsula producing properties, and serves as a winter gas supply backstop for local utilities.
After 2013 or 2014 there may be insufficient gas production to supply utility needs and the export plant, studies done by the utilities indicate.
ConocoPhillips has said it was interested in having the LNG plant facilities used in some manner to meet regional energy needs, but John Sims, a spokesman for Enstar, said the utilities are so far not talking formally with ConocoPhillips about using the plant for imports.
"LNG imports are an important option for us, but we need to understand whether they are economically feasible," Sims said in an interview.
The utilities have also had talks with another company that could bring an LNG carrier with on-board regasification capabilities to Cook Inlet, Posey said, not identifying the company.
An idea being considered is approaching ConocoPhillips and Marathon about using LNG storage tanks now at the Kenai plant if LNG was brought there.
COST RANGE OF $150 MILLION-$300 MILLION
One concern about using facilities at the LNG plant is that any new use or reconfiguration of the plant would bring the facility under stricter --and costlier -- federal environmental and safety regulations than existed when it was built in 1969.
Another concern is that a dock built at the plant was designed for the two smaller LNG carriers built in 1969 to transport LNG from Kenai to Tokyo, one of which is still operating on the route. Most LNG carriers today are larger, so the dock would have to be modified.
The cost of building new or reconfigured LNG facilities to handle imports could range from $150 million-$300 million, utility managers have estimated. Regional consumers will have to pay these costs on top of new costs for gas storage now planned to be built about the same time.
Enstar and MidAmerican Energy, meanwhile, are awaiting regulatory approval for a new $180 million gas storage facility on the Kenai Peninsula that would help utilities meet winter gas deliverability needs. The potential LNG imports would fill shortfalls in total supply.
In addition to utility needs. there are potential new industrial customers, including large mines.
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