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NEWS BULLETIN

June 09, 2010 --- Vol. 16, No. 51June 2010

Kenai LNG owners formally request export license extension

ConocoPhillips has formally asked the U.S. Department of Energy for additional time to export liquefied natural gas from the facility in Nikiski it owns with Marathon Oil.

The owners made the application yesterday, the company told Petroleum News.

ConocoPhillips previously told Alaska policymakers that it would not be asking for permission to ship additional volumes overseas, only for more time to ship the volumes already approved in a previous license extension. The current license allows the companies to ship some 99 billion cubic feet of natural gas through March 31, 2011. The companies expect to have 45 bcf remaining of that allowance by the deadline, and told policymakers they planned to ask for a two-year extension, through March 31, 2013.

That distinction helped win support from several critics of the previous extension request, including Chugach Electric Association, the second largest gas user in the state.

The export facility is often criticized for shipping gas overseas as production declines locally, but is also considered crucial for maintaining deliverability during peak demand because it serves as the largest de facto storage unit in the Southcentral region.

Those local diversions are evident in monthly shipping levels. According to figures from the Department of Energy, the Kenai facility shipped nearly 5.8 bcf to Japan in March and April of this year, but only 3.8 bcf in much colder months of January and February.

The application for an extension of the export license holds broader implications in the region. The volumes in a recently approved natural gas supply contract between Marathon and Enstar Natural Gas depend on the continued operation of the facility.

Editorís note: See story in the June 13 issue, available online to subscribers at noon Alaska time Friday, June 11 at www.PetroleumNews.com.

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