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March 19, 2012 --- Vol. 18, No. 19March 2012

PRA: Cook Inlet gas supply/demand shortfall expected in 2014 or ’15

Absent major new natural gas discoveries in the Cook Inlet basin that can be brought online in one to two years, at the current pace of development a shortfall in Southcentral Alaska’s gas supply will occur in 2014 or 2015.

That is the conclusion of Petrotechnical Resources of Alaska’s Cook Inlet Gas Supply Study Update, per PRA’s Pete Stokes.

“Update” because it is a follow-up to the study of the same name done in 2009 by PRA. Both the original study and the 2012 update were ordered by Cook Inlet utility companies Enstar, Chugach Electric and Municipal Light & Power.

The 2009 study predicted a shortfall in 2013 if no new wells were drilled, but drilling and compression additions since that time have bumped the shortfall between supply and demand to 2014 or 2015.

In 2009 PRA said if current trends in drilling success rates continued, an estimated 185 new wells “must be drilled from 2012-2019 to meet utility needs between now and 2020.”

So how many new wells have been drilled in the two years between November 2009 and October 2011?

According to Stokes’ presentation overheads only 11 wells, as compared to 105 wells completed in the Cook Inlet basin between 2001 and 2009, and the 34 wells completed in the two year period between 2007 and 2009.

“Material increases” in the last two years mainly came from eight wells in the Beluga River, Trading Bay and Ninilchik units, PRA said.

In 2009 PRA said if near-term drilling did not keep pace with demand, the only viable option was liquefied natural gas imports, an option that required “immediate action.”

“LNG imports could be necessary for several years until an in-state gas line is available,” the 2009 report said.

Going forward, if three to four new wells are drilled each year in the current producing fields, resulting in 10 million cubic feet per day of new production each year from 2012 to 2019, there will be a shortfall in supply in 2014.

But if six to eight wells are drilled each year, adding 20 million cubic feet per day of new production each year from 2012 to 2019, the shortfall would occur in 2015.

The 2012 update noted that the estimated cost of Cook Inlet basin drilling and development in the past decade was $1–$1.2 billion. The estimated cost of drilling and development to meet demand in the coming decade would be $1.9-$2.8 billion, and that higher production costs would lead to higher prices for energy.

—Kay Cashman

See story in March 25 issue, available online Friday, March 23 at 11 a.m. at www.PetroleumNews.com

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