Enstar Natural Gas Co. is looking to connect a new supply source to its system.
Bu the natural gas won’t come from existing fields, new exploration or even imports.
It will come from a hidden corner of the Kenai liquefied natural gas facility.
Just like the last scoop of peanut butter scraped from the inside wall of the jar, Enstar wants to purchase the small quantity of natural gas “produced” by warming LNG tanks.
This “boil-off gas” is an inevitable by-product of LNG storage. To preserve its liquid state, LNG must be kept in super-cooled containers. But even with good insulation, some heat leaks into tanks, causing a small portion of the LNG to revert to a gaseous state.
Enstar recently signed an agreement with ConocoPhillips, the owner of the Kenai LNG plant, to purchase boil-off gas through 2016. The sales would begin as soon as the Regulatory Commission of Alaska approves the contract and the companies finish building the interconnection facilities required to move the gas into the existing system.
The RCA is taking comments of the agreement through July 5.
Small, but usefulThe volume of sales depends on the amount of gas available and the amount of demand in the Enstar distribution area within a given time, but the companies expect both the plant to produce and the system to demand some 900,000 cubic feet per day on average.
The boil-off gas would provide only a small supply, but it could come in handy on those extra cold days when every bit counts. For comparison, the 300 million cubic feet per year in boil-off gas would supply less than 1 percent of the total Enstar annual demand.
For ConocoPhillips, the agreement provides a way to earn revenue from the LNG plant, which was pioneering when it came online in the late 1960s, but has recently suffered from uneven supplies locally and uneven demand from its traditional customers in East Asia. The future of the facility is currently uncertain. ConocoPhillips recently chose not to request another extension of the export license required to ship volumes overseas.
The boil-off gas will serve as an interruptible supply, and either party would be allowed to terminate the agreement at any time and for any reason except to chase a better price.
The gas would be priced using the mechanism in an existing base gas contract between ConocoPhillips and Chugach Electric Association, which came to $3.46 per thousand cubic feet in the second quarter. The mechanism has the benefit of having already received RCA approval.
Chugach recently asked the RCA to approve the agreement, saying the deal “maintains the readiness” of the LNG plant, which in turn “preserves locally produced LNG as an option for excess gas that is discovered, either for export or to help meet local needs.”
ConocoPhillips is reimbursing Enstar for the cost of the interconnection facilities.
Because the boil-off gas is produced at low pressure, it is only appropriate for use in the distribution system and cannot be injected for underground storage, according to Enstar.