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Cook Inlet LNG for needle peaking only Alaska Natural Gas Development Authority contractor Tony Izzo tells board there is no plan to import all gas needed in Southcentral Kristen Nelson Petroleum News
At Nov. 10 Alaska Natural Gas Development Authority board meeting, Tony Izzo, an ANGDA contractor working with the gas supply co-op, said there is some misunderstanding about how liquefied natural gas would be used to meet Cook Inlet supply needs.
It wouldn’t replace the natural gas supply now produced from Cook Inlet fields, he said, but is being considered only to meet peak needs.
He said what the Natural Gas Supply Co. is doing breaks down into two areas — Cook Inlet, which is what the co-op is working on near-term and mid-term, focused “on solutions around supply and deliverability,” and the long-term potential solution, which is the open seasons for a North Slope gas pipeline.
The near-term needs for Cook Inlet include a recent evaluation of a potential commercial arrangement with Aurora Gas. Izzo said the conclusion was “that there probably was not a commercial transaction that was a good fit with the various utilities,” but there is a continuing search for potential third-party transactions “that might make sense for some or all of the regional electric utilities.”
And the co-op continues to vet the possibility of using the Kenai LNG facility.
LNG a specific tool Izzo said he continues to hear liquefied natural gas discussed as though it would replace Cook Inlet natural gas.
“LNG represents a tool that brings with it specific characteristics to meet peak demand,” he said, in particular “the characteristics of having an instant-on, high-pressure, high-volume, instant-off capability” LNG would probably only represent in the range of 1 to 5 percent — 10 percent maximum — of natural gas demand, he said.
LNG imports tend to be viewed negatively, Izzo said, “but it really is not intended — nor would I ever view it as something — that’s going to flip our entire demand from some in-state domestic supply to all of a sudden one day we’re going to have foreign-flag ships coming in and displacing 100 percent of in-state demand.”
Discussions of using the Kenai LNG facility or other LNG-related solutions are really “about the ability to meet that 1 or 5 percent of our demand on that really cold day where it might be much more efficient and cost effective to do it in such a fashion,” Izzo said.
ANGDA CEO Harold Heinze said ANGDA’s “contribution to the Cook Inlet discussion is not nearly so much as a doer but … as almost a fomenter of things,” such as the suggestion it floated a few months ago during the export license renewal process of modifying the Kenai LNG plant so it would be more useful. “And because of that, a lot of other discussions took place,” he said.
Enstar, electric utilities different Heinze said that while Enstar and the electric utilities use about equal amounts of natural gas on a yearly basis, they have “entirely different characteristics” in terms of how they use that gas.
Enstar, which provides natural gas for heat, “is totally seasonal” with a huge swing between summer and winter use, and when Enstar addresses issues like storage or bringing in LNG, “they’re trying to account for the fact that there’s a huge demand in the winter that has to be met, and not much of a demand in the summer.”
The electric utilities, on the other hand, use natural gas “on a fairly constant rate,” with peaks during the day.
The concern the electric utilities have about “gas is very simple: If Enstar doesn’t solve its problem, or if something else goes wrong in the system, they’re the ones who get turned off.”
Heinze said what the electric utilities are doing is essentially buying insurance so they can stay online and customers don’t experience brownouts or blackouts.
So when the electric utilities talk about LNG, “we’re talking about an opportunity to get some cargoes, to make them available … when other supplies might be diverted for home heating and the electrics then would still have a good supply for making electricity.”
Changes over time The need for peaking gas is a recent one, Izzo said.
“For 40 or 50 years, well pressure could provide” for peaking needs. But with declining deliverability earlier in the decade, “some of the producers realized that to fulfill their contractual obligations, they needed to develop their own proprietary storage so they could maximize what they had and most efficiently perform under that contract,” he said.
Unocal, for example, began storing gas during the summer so it could levelize flow throughout the year.
But today, producer storage isn’t enough, so Enstar is working with Chugach and Municipal Light & Power, seeking regulatory approval to provide third-party storage.
If that plan goes forward in 2012-13, Izzo said it might meet 80 to 95 percent of the deliverability gap, but there would still be “needle peaks if it gets really cold” or if you get out past a certain point and still have a “missing gap in deliverability.”
Well flow and seasonal well storage aren’t the most effective way to address needle peaking, he said, because “you need something that’s an instant on and an instant off.”
LNG is a way to “very quickly introduce a lot of gas when needed at a very high pressure and have the ability to turn that on and turn that off,” Izzo said, and an alternative that needs to be vetted publicly.
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