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Vol. 22, No. 8 Week of February 19, 2017
Providing coverage of Alaska and northern Canada's oil and gas industry

Another LNG option

Plans move forward for Houston plant for shipping LNG on Alaska Railroad

ALAN BAILEY

Petroleum News

A new option for liquefying and marketing natural gas from Alaska’s Cook Inlet has emerged in the form of a proposed liquefied natural gas plant located in Houston, Alaska, to produce LNG for shipment on the Alaska Railroad. Consultants have been working with a major corporation with worldwide LNG experience for the construction of the plant on a 20-acre site belonging to the Knikatnu Corp. at an existing railroad spur at Millers Reach, one of the consultants, Roger Purcell, senior partner with East West Pacific Consulting, told Petroleum News Feb. 13. Knikatnu is the Native village corporation for the Knik and Wasilla area.

Supply to rural communities

The idea is to ship LNG by cryogenic container to rural communities. The railroad could transport containers to Nenana, on the Alaska river system, to Fairbanks and to the ports of Whittier and Seward to the south. Containers could be loaded onto barges for transportation to river-based communities, or to be shipped by sea to communities around Alaska’s coast. With the containers used on site for LNG storage, communities could then use natural gas as a clean alternative to more expensive fuel oil and diesel fuel for heating buildings, for power generation and in gas-fueled heat and power cogeneration systems, the project envisions. Purcell said that existing diesel generators could easily be converted to use natural gas. And the project economics indicate that LNG could be delivered to communities at a cost that would make it appealing to convert from the use of oil, Purcell said.

The LNG plant at Houston would be of a modular design, pre-fabricated and shipped to the Houston site by barge and rail for assembly.

A joint venture

Purcell said that the corporation they are working with wants to form a joint venture with Knikatnu and the manufacturer of the LNG plant for the project. Private investors, who have already been identified, would fund the project, he said. The fact that there is a ready-made railroad loading point with a 180-car siding at Millers Reach has proved critical to the project viability. And the Federal Railroad Administration has recently issued a license to the Alaska Railroad for the carriage of LNG in Alaska.

Purcell also said that the project team has an agreement with a Cook Inlet gas producer for the supply of the required volume of gas at an acceptable price, although that agreement has not yet been signed. The LNG plant could be up and running at the Houston site in about 40 weeks, enabling it to be completed about a year from now - the plant itself would take about 12 weeks to assemble, he said.

Initial operation would use about 3 million cubic feet per day of gas, resulting in the production of 30,000 gallons per day of LNG. However, the modular design of the LNG plant would enable future expansion to meet growing demand, as required. The consultant team anticipates the possibility of a demand for 12 million cubic feet per day of gas within five years, Purcell said.

An Enstar gas transmission pipeline runs about 12 miles from the project site. A small feeder line from that main line carries gas to within one-and-half miles of the site and would be connected to the plant for initial production. However, an expansion to 12 million cubic feet per day would require a larger diameter feeder line, connected back to the transmission line, Purcell said.

Interior Energy Project

An existing small LNG plant operated by Titan, a company owned by the Alaska Industrial Development and Export Authority, currently ships some LNG to Fairbanks by road trailer. AIDEA’s Interior Energy Project is planning to expand that plant as part of an initiative to greatly increase the supply of natural gas for the Interior city. The AIDEA team has been negotiating with a Cook Inlet gas producer for a gas supply at a workable price. However, Purcell said that the Houston project could deliver LNG to Fairbanks at a lower cost than from the Point MacKenzie plant.

As well as owning the Port MacKenzie LNG plant, AIDEA owns Fairbanks Natural Gas, one of two gas utilities operating in Fairbanks. Under the terms of a memorandum of understanding signed in January by AIDEA and the Interior Gas Utility, the other Fairbanks gas utility, IGU will purchase FNG, the LNG plant and the associated LNG trucking operation, once AIDEA has formed an acceptable gas supply agreement with a Cook Inlet gas producer, and once the agency and IGU have adopted an expansion plan for the LNG facility.

“AIDEA continues to negotiate documents to facilitate the consolidation of Fairbanks Natural Gas and the Interior Gas Utility under the terms of the recently signed MOU,” AIDEA spokesman Karsten Rodvik told Petroleum News in a Feb. 15 email. “Although we are aware of concepts that propose alternative supplies for Interior energy needs, or alternative siting for the LNG facility, we are not aware of any that have advanced to the point where an apples-to-apples comparison to the planned phased expansion of the existing Titan LNG facility at Point MacKenzie can be made.”

The Mat-Su Valley Frontiersman originally reported the Houston LNG plant project.



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