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Vol. 18, No. 5 Week of February 03, 2013
Providing coverage of Alaska and northern Canada's oil and gas industry

Stored gas now crucial for utilities

The new natural gas storage facility, known as Cook Inlet Natural Gas Storage Alaska, or CINGSA, that went into operation in the spring of 2012 on the Kenai Peninsula, is proving vital to Southcentral Alaska utility gas supplies as, for the first time, the ability of the Cook Inlet gas fields to deliver utility gas fast enough during periods of winter cold has dropped below the gas deliverability needs.

December needs

During a presentation to the House Energy Committee on Jan. 23 Moira Smith, vice president and general counsel of Enstar Natural Gas Co., explained how during especially cold weather in mid-December Enstar, the main Southcentral gas utility, had withdrawn gas stored in CINGSA to meet the utility’s daily gas needs. Enstar had warehoused the gas in CINGSA during the summer, when gas demand was relatively low.

Enstar now finds itself in a situation where it has insufficient gas supplies under firm contract with gas producers to fully meet its needs. The company has been operating a daily bidding system, soliciting several producers to bid daily quantities of gas to fill Enstar’s supply shortfalls. But, with the bid gas proving insufficient to fill all of the supply gaps, Enstar has had to take some of its gas from storage.

On Dec. 17, for example, the total system demand was 225 million cubic feet of gas, and Enstar was able to fill some of its supply shortfall from bid gas, Smith said.

“We paid not insignificant amounts for that gas and we still had to dip into CINGSA to the tune of 60 million (cubic feet) for that day,” Smith said.

Less than planned

Smith told the lawmakers that because of tight Cook Inlet gas supplies during 2012, Enstar had not been able to obtain all of the gas that it intended to store for the winter. As of Jan. 18 Enstar had 3.4 billion cubic feet of gas in CINGSA, Smith said.

The CINGSA facility itself has been unable to obtain all of the gas that it had planned to use as pad gas, the gas that is permanently stored in the facility to maintain the gas pressure in the underground storage reservoir. The consequent lack of full pressure in the reservoir slightly degrades the storage facility’s contracted withdrawal rate of 136 million cubic feet per day, Smith said. So far this winter Enstar’s highest daily withdrawal rate has been 70 million cubic feet, she said.

Two other utilities — Chugach Electric Association and Municipal Light & Power — also use the CINGSA facility. Smith said that Chugach Electric had also been unable to obtain all of the gas that it had planned on storing, but that ML&P had eventually obtained all of its gas.

No wiggle room

Given the tight gas supply situation, a production failure in a gas field or a problem with one of CINGSA’s gas compressors would trigger a need to generate power from diesel generators, Smith said. ML&P has a backup diesel generation system. Also, if March turns out to be unseasonably cold, Enstar could entirely deplete its CINGSA gas and thus be unable to meet its peak deliverability needs, Smith said.

Smith told the Senate Resources Committee that, without the gas demand flexibility provided in the past by liquefied natural gas and fertilizer facilities on the Kenai Peninsula, there is no longer any slack in the system.

“We’re counting on production to be exactly what we need to meet Cook Inlet demand, and that’s a big risk, because on any given day production hiccups can occur, CINGSA’s compressors could go down,” Smith said.

LNG exports

During the Senate Resource Committee meeting Sen. Fred Dyson, R-District F, asked utility officials whether the export of gas through the Kenai Peninsula liquefied natural gas plant had contributed to the difficulty of delivering sufficient gas to CINGSA. Bradley Evans, CEO of Chugach Electric, said that, while there had been difficulties in balancing the needs of various gas supply contracts during the summer, gas exports had not occurred as the same time as the problems in obtaining CINGSA gas.

“It’s just another demonstration that there’s been a decline in the Cook Inlet and it gets more and more difficult to meet the needs of all the people that want the gas,” Evans said.

—Alan Bailey



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