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Cook Inlet LNG exports continued in 2012
An announcement by ConocoPhillips in February 2011 that the company was going to close the liquefied natural gas export facility at Nikiski on Alaska’s Kenai Peninsula came as no surprise, given the tightening gas supply situation in the Cook Inlet basin. But the Fukushima nuclear disaster about a month after the closure announcement dramatically changed the outlook for the Nikiski plant, as Japanese power plants upped their gas usage, causing an increased demand for liquefied natural gas, or LNG. And so LNG exports continued from Nikiski into 2012, albeit at a much lower rate that in the plant’s heyday.
The Department of Energy’s LNG export license for the plant allows exports to continue until March 2013 up to a specified volume of the product.
But how is it possible to export LNG from the Cook Inlet basin at a time when local gas and power utilities are facing a gas supply shortage? The utilities expect to run short of gas in about a couple of years’ time, unless new sources of supply can be established.
Exports began in 1969 The LNG plant went into operation in 1969 to provide a market for huge volumes of excess gas from Cook Inlet oil and gas fields at that time. But with gas supplies becoming tight, the export of LNG has started to compete with the demand for gas from the utilities — in 2012 Cook Inlet Natural Gas Storage Alaska, or CINGSA, the company operating a new gas storage facility on the Kenai Peninsula, reported that it was experiencing difficulty obtaining all of the gas that it needed to build the necessary gas pressure in its storage reservoir, with CINGSA saying that some of the gas that it had anticipated obtaining for storage was instead being exported as LNG. CINGSA has subsequently continued purchasing additional gas into the winter, to ensure that its gas pressure requirements can be met.
LNG plant has helped utilities Overall, the LNG plant has a history of helping rather than hindering the local utility gas industry. The utility market in Southcentral Alaska is small — the LNG plant has created a larger market, sufficient to justify the development and operation of large gas fields. And, by continuing its operations year round, the plant has enabled gas wells to continue production through the summer when utility gas demand is low: The temporary shutting in of a well in the summer will typically damage subsequent well performance by allowing water encroachment from the underground gas reservoir.
And, the LNG plant has provided a gas deliverability backstop for the utilities during severe winter cold — the plant has been able to provide that backstop by temporarily curtailing its own operations and diverting gas to the utilities.
But, with question marks over the LNG plant’s future, the CINGSA storage facility which went into operation in 2012 is now providing the deliverability backstop. And, as Cook Inlet gas supply levels drop towards levels of utility demand, and as the end date of the LNG export license looms ahead, the LNG plant will presumably have to be shut in, at least until some new major gas fields come on line, something unlikely to happen for at least another few years.
—Alan Bailey
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