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Vol. 19, No. 51 Week of December 21, 2014
Providing coverage of Alaska and northern Canada's oil and gas industry

Increasing deliverability

Hilcorp plans increased compression for east-to-west shipments across Cook Inlet

Eric Lidji

For Petroleum News

Kenai Beluga Pipeline LLC is looking to improve east-to-west deliverability of natural gas supplies across Cook Inlet to meet increased west side industrial demand.

The Hilcorp Alaska LLC subsidiary wants to modify an existing compressor and add two new compressors at the Kenai Pipeline Junction to allow for larger shipments from producing fields on the east side of the Cook Inlet basin to facilities on the west side.

The goal would be to increase east-to-west shipments to 165 million cubic feet per day.

The direct shipments would serve Matanuska Electric Association’s new Eklutna Power plant, as well as Chugach Electric Association’s Beluga Power Plant, the Titan Alaska LLC liquefied natural gas facility and Enstar Natural Gas Co. facilities in the region.

The Regulatory Commission of Alaska is taking comments through Jan. 2, 2015.

Earlier this year, with an eye toward increased efficiencies, Hilcorp Alaska consolidated four major Cook Inlet pipelines - Kenai Nikiski Pipeline, Kenai Kachemak Pipeline, Cook Inlet Gas Gathering System and Beluga Pipeline - into a single system called the Kenai Beluga Pipeline. The consolidated system operates under a previous certificate.

Deliverability and redundancy

The $16 million project would increase deliverability and redundancy.

Southcentral Alaska supports an integrated transmission grid that connects oil and gas production facilities to industrial centers and to residential and commercial properties.

On the west side of Cook Inlet, industrial activity is increasing while gas production from nearby fields is declining, leaving east side production facilities to pick up the slack.

The shortfall began several years ago.

In 2011, Kenai Nikiski Pipeline LLC and the Cook Inlet Gas Gathering System LLC proposed the East-West Flow Project, which allowed the two west-to-east pipelines to become bi-directional. The Regulatory Commission of Alaska approved the project.

East-to-west shipments began in 2012 and have “become increasingly important,” according to Kenai Beluga Pipeline LLC. East-to-west shipments on the Kenai Nikiski Pipeline and the Cook Inlet Gas Gathering System totaled 1.7 billion cubic feet in 2012 and 2.7 bcf in 2013, peaking at 24 million cubic feet per day in November 2013. “Further increases are expected in 2014,” Kenai Beluga Pipeline wrote.

Uncertain production

The need for increased shipments comes, in part, from uncertain production.

Over the past year, gas production from the Hilcorp-operated Steelhead platform at the McArthur River field has tripped offline on 32 separate occasions, each requiring additional shipments from the east side, according to Kenai Beluga Pipeline. The Beluga River unit is also seeing declining production, according to the company.

Additionally, using Alaska Oil and Gas Conservation Commission figures, Hilcorp expects total west side gas production to decline by 15 percent per year through 2016.

The additional compression would be installed at the Kenai Pipeline Junction. The two new compressors would be Cat 3516 reciprocating engine driven compressors. The added compression would increase gas transmissions to some 165 million cubic feet per day.

The additional compression would also bolster the system.

A single compressor at Kenai Pipeline Junction currently powers all east-to-west gas shipments. “While it is newly installed and well maintained, there will inevitably be some future mechanical failures,” Kenai Beluga Pipeline wrote. “Should the sole KPL Junction compressor fail during a cold weather event, the consequences would be considerable.”

Anchorage requirements

Additionally, the existing 63 million cubic feet per day compressor at Kenai Pipeline Junction cannot fully compensate for the 235 million cubic feet per day capacity of Enstar crossings under Turnagain Arm, which supply the city of Anchorage. Should that pipeline fail, gas must be routed around the west side of Cook Inlet into Anchorage.

Although a problem on the Enstar pipelines is “less likely to occur” than a compressor failure, according to Kenai Beluga Pipeline, an event is “still possible.”

While the added compression wouldn’t fully compensate for the Turnagain Arm pipeline, it would greatly increase the flexibility of the system should something go wrong.

At a public meeting before the RCA in May 2013, Enstar Director of Engineering John Lau proposed the idea of adding two additional compressors to increase deliverability, saying that his “wish list” was capacity of 200 million to 250 million cubic feet per day.

Would raise costs

In addition to the estimated $16 million construction cost, the expansion would nearly triple operating costs - as expected with a more than tripling of compression capacity.

By comparison, Enstar previously estimated it would cost some $35 million to add a crossing under Turnagain Arm and even more to expand existing crossings.

The compressor currently costs some $106,000 a year to operate, excluding fuel gas. The expansion would cost some $294,000 per year to operate, also excluding fuel gas.

Those costs would be included in the rate case Hilcorp intends to file for the system in 2016. Hilcorp expects shipping rates to increase by 4.8 cents per thousand cubic feet.



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