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Imports and exports? Imports or exports? LNG exports provide storage and the LNG plant can be used for imports if production declines persist, but is it either-or? Eric Lidji For Petroleum News
When policymakers discuss contingency plans for Cook Inlet natural gas, the liquefied natural gas plant in Nikiski is commonly brought up as being a short-term solution for two problematic declines: deliverability during peak demand and overall production.
Are those solutions mutually exclusive?
Bob Stinson put that question to Dan Clark, ConocoPhillips’ manager of Cook Inlet assets, at an April 21 meeting of the Anchorage Mayor’s Energy Task Force.
If the commercial situation in 2013 warranted another two-year extension of the export license for the LNG facility, but Cook Inlet production declines warranted imports, “Could you be doing both at that facility?” Stinson, president of Conam Construction Co. and a past president of the Alaska Support Industry Alliance, asked Clark.
“That I don’t know,” Clark said.
By June 1, ConocoPhillips and Marathon Oil plan to ask the federal government for an extension of the export license that allows them to ship Cook Inlet natural gas to Asia. If approved, the extension would allow the companies to continue exports through 2013.
The current license expires on March 31, 2011.
Contradicting contingencies? ConocoPhillips touts the plant as a backstop for Cook Inlet, essentially the best storage option available. Storage allows producers to pull on wells evenly throughout the year, despite seasonal swings in demand, and improves deliverability during cold snaps.
Significantly increased production and storage would make those benefits unnecessary, because the system as a whole would always have enough gas available for local needs.
At the current rate of decline, though, regional demand could outpace supply by 2015, and without new gas supplies the Southcentral region might need short-term imports.
Under that scenario, the plant could be converted into an import facility, where liquefied natural gas from other parts of the world is re-gasified for local use. That solution might not be economic or practical, but it’s been discussed as a technically viable solution.
Can the plant be considered for both contingencies at the same time, though? Or does pursuing exports and storage mean the plant can’t be retrofitted for possible imports?
“Everybody’s got in their mind that it’s an either-or situation,” Stinson said.
Rather than simultaneous imports and exports, Clark hypothesized, a more likely scenario would be local users drawing from exports. “In other words, have the ability to either go into the tanker and go to Japan, or go into re-vaporizers at the peak need time,” he said.
That’s similar to the existing process, but doesn’t answer the question of whether the plant can be retrofitted while exports are ongoing, or if a decision needs to be made.
The current extension request, though, suggests another in 2013 might be unlikely.
ConocoPhillips and Marathon aren’t asking to ship more gas to Asia, only to have more time to export the volumes they’ve already been cleared to ship. The current extension let the owners export some 99 billion cubic feet. So far, they’ve shipped less than a third of that and expect to have about 45 bcf remaining by the time the license expires in 2011.
As Stinson noted, there is a chance some of that will still by unshipped by 2013.
Investments and competition As with everything in Cook Inlet, there are other complexities.
One reason often given for the lack of ongoing exploration in the Cook Inlet basin is the lack of a market for new supplies. With expanded federal support, far beyond what ConocoPhillips and Marathon are requesting, the LNG plant could greatly increase the market for local producers, opening up the entire Pacific Rim to Alaska natural gas.
Task force member Gary Carlson wondered why producers would explore for gas in Cook Inlet if policymakers continue to propose in-state pipelines from the North Slope.
Clark said he saw the point, but that it wouldn’t impact ConocoPhillips’ decision making. However, earlier in the meeting, he noted that while ConocoPhillips spent some $150 million on its Cook Inlet legacy fields over the past three years, the company is not committing exploration dollars to the region. That money is focused on the Chukchi Sea.
Underpinning all plans is age. The plant turned 40 in 2009. Many of its parts are just as old, meaning any long-term plans for the facility would require significant reinvestment.
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