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February 2019

Vol. 24, No. 6 Week of February 10, 2019

IGU board authorizes FEED for expansion of the Titan LNG plant

Alan Bailey

Petroleum News

During its Feb. 5 meeting the board of the Interior Gas Utility approved the commissioning of Braemar Technical Services to conduct the front-end engineering and design for the expansion of the Titan liquefied natural gas facility near Point Mackenzie on Cook Inlet. Coffman Engineers Inc. will contract with Braemar on the FEED project. The board has approved a project cost not to exceed $800,000 - Braemar has estimated a cost slightly below that figure.

The project forms part of the Interior Energy Project, a project sponsored by the Alaska Industrial Development and Export Authority, to bring an increased supply of natural gas to Fairbanks and its surrounds. IGU has purchased Pentex Natural Gas Co., the owner of the Titan plant, a trucking operation to ship LNG to Fairbanks and Fairbanks gas utility Fairbanks Natural Gas. The idea is to expand the Titan plant, in support of that expanded Fairbanks gas supply.

The current Titan plant is referred to as Titan 1. The expansion plan involves adding new LNG trains in two stages, designated Titan 2 and Titan 3. Titan 1, the existing plant, has a throughput capacity of 50,000 gallons of LNG per day. It is planned that Titan 2 and Titan 3 will each have capacities of 100,000 gallons per day.

Security of supply

Before commissioning the FEED project, IGU had been wrestling with issues relating to the security of the LNG supply. The worry is that if, say, one of the LNG trains were to go out of action, especially during the winter, the adequacy of the Fairbanks gas supply may be compromised. The utility commissioned HDR Engineering Inc. to conduct a study into different LNG facility options, and the impact of different options on supply reliability. Another factor playing into this issue is uncertainty over the rate at which Fairbanks residents and businesses will start using natural gas, as more gas becomes available: A slow rate of increase in the gas demand would push the economics towards delaying the construction of additional LNG capacity, relative to the timing of construction should gas demand prove buoyant.

The board reviewed the results of the HDR study during a work session on Jan. 15. Essentially the HDR analysts had evaluated various scenarios involving different timings for building out the Titan 2 and Titan 3 plants, including the possibility of spreading risk by reducing the capacities of the two plants to 50,000 gallons per day and then building a Titan 4 plant with a 100,000 gallons-per-day capacity. The analysis also included a scenario involving an LNG plant that manufacturing company Siemens proposes building near Houston, on the Alaska Railroad.

Against these scenarios the analysts assessed the viability of the Fairbanks gas supply, should one of the LNG trains go out of action for extended periods of time during the winter.

IGUís expectation is that Fairbanks gas availability and demand will start to grow, once a new Fairbanks LNG storage tank that the utility is building becomes operational at the end of this year. And the original concept for the Titan plant expansion involved commissioning the FEED for Titan 2 now, thus enabling the Titan 2 construction to proceed as that demand continues to increase. The Titan 3 FEED and construction could then follow in response to demand growth.

FEED for both Titan 2 and Titan 3

The upshot of the reliability of supply assessment has been a decision to commission the FEED for both Titan 2 and Titan 3 up front. The expectation is that Titan 2 would be constructed in 2022. The timing of the construction of Titan 3 would depend on the rate of growth in Fairbanks gas demand - construction could start early if demand is high but be delayed if demand growth is sluggish.

Under Braemarís proposal for the FEED project, which the IGU board has now approved, the project would run through to early November of this year. Based on Braemarís project plan, an estimated budget for the ensuing construction project would become available around Sept. 10 or 11, enabling the board to make a final investment decision for the Titan expansion at that time. IGU would then seek base bids for the construction of Titan 2, but with bids for Titan 3 at the same time. IGU also want to understand what cost savings might be achieved if Titan 2 and Titan 3 were to be built as a single project.

Siemens negotiations

Meanwhile, IGU is continuing to negotiate with Siemens over the terms and conditions for an LNG supply from Siemensí proposed facility. The board is hoping that the terms of the Siemens proposal will be sufficiently clear by April to make an objective comparison at that time with the planned Titan expansion. Apparently a key factor in this comparison will be the terms of the gas supply that Siemens will require for its plant.

- ALAN BAILEY






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