Division gives Marathon thumbs up on Kenai gas storage plan

Alaska’s Division of Oil and Gas has published a notice that it intends to issue a gas storage lease to Marathon Oil Co. for natural gas storage within the Sterling formation pool 6 C1 and C2 sands of the Kenai gas field. The reservoir for the gas storage lies in a mix of state, Cook Inlet Regional Inc. and Marathon subsurface land, as well as in multiple tracts of other privately owned subsurface. The lease will only apply to state land within the gas storage facility and will have a primary term of 10 years.

Marathon applied for the gas storage lease on Dec. 16. In March the division determined that the proposed lease was consistent with the Alaska Coastal Management Program.

According to the division’s final finding for the gas storage lease, pool 6 gas production in the Kenai field is measured separately from other gas streams for reservoir management and royalty allocation purposes. And because some recoverable “native” gas still exists in the gas storage reservoir, royalties will be paid on estimated volumes of native gas recovered along with gas that has been injected for storage purposes.

The final finding says that Marathon will use the Kenai facility to store gas from the Ninilchik and Cannery Loop units, but that the company could store non-odorized gas from other producing fields connected to the Kenai-Kachemak pipeline.

Marathon plans to cycle 6 billion to 11 billion cubic feet of gas through the storage facility each year, injecting gas in the summer and withdrawing gas in the winter, according to the final finding. That amount of storage capacity will add to the capacity of 2.7 billion cubic feet in the existing Swanson River and Pretty Creek storage facilities operated by Unocal (now owned by Chevron).

Gas storage alleviates gas supply shortages in the Cook Inlet area by storing gas during periods of low demand to help meet peak winter demand.

—Alan Bailey