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Providing coverage of Alaska and northern Canada's oil and gas industry
January 2007

Vol. 12, No. 1 Week of January 07, 2007

Izzo: Short-term LNG could help spur line

Kristen Nelson

Petroleum News

A story in the Dec. 31 issue of Petroleum News quoted former Enstar CEO Tony Izzo as telling the Alaska Natural Gas Development Authority board that liquefied natural gas imported into Cook Inlet could kill a spur line because of the facilities costs involved — costs which would have to be borne by ratepayers.

But that was just the downside to importing LNG; there is a big upside.

Izzo said the article only covered what would happen if there was a long-term, major commitment to import LNG.

“The existing LNG plant,” he told Petroleum News, “could actually be what helps get us a spur line if it’s used to bridge some of the gap between now and when the spur line could be built.”

Izzo said his comments to the ANGDA board were in response to a question about possible long-term LNG imports to the area.

It is the cost of a whole new LNG facility, which the Regulatory Commission of Alaska would have to approve, that could kill a spur line project, he said.

RCA would not be likely to approve rate increases for natural gas customers to pay for the cost of a major new LNG receiving facility, and then a few years later approve costs to ratepayers for a spur line to bring in North Slope natural gas.

Short-term import could fill gap

But short-term import of LNG into Southcentral could bridge the gap to a spur line, he said.

Izzo said the cost to import and re-gasify LNG at the existing plant could be much lower, perhaps $70 million, compared to hundreds of millions to construct a new LNG receiving facility.

The plant that ConocoPhillips and Marathon have on the Kenai Peninsula could be a critical part of getting Southcentral a spur line. The existing LNG facilities could be used to import small quantities of LNG and store it for winter use, when the need for LNG peaks.

“The existing plant is a huge asset and could play a key role for utilities when they need gas in the next decade,” Izzo said.

He said LNG could be an interim option. It might be the best short-term option.

“The plant already helps utilities when they need gas; let’s make sure we don’t overlook the value of the plant helping us meet our peak demand in the future,” he said. At $100 million or less to convert the plant for receiving LNG imports to handle future peak needs in Southcentral, that option “might make the most sense for all of us as ratepayers.”






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