For decades Southcentral Alaska has had enough natural gas that meeting peak winter demands was not a problem. The area didn’t require what is a fixture of the natural gas business in the Lower 48, gas storage — reservoirs which are filled with gas when there is a day-to-day surplus of production and tapped when there is a day-to-day shortage.
Unocal, which has the only storage in the area, is using reservoirs at the Swanson River field, but the field is in the Kenai National Wildlife Refuge and Unocal has only been allowed to store gas produced in the refuge.
Unocal wants to increase its storage capacity at Swanson, and also bring in gas from outside the refuge for storage.
The company is applying to the agencies responsible for the refuge, the U.S. Department of the Interior’s Bureau of Land Management and Fish & Wildlife Service, for both expanded storage and the ability to import gas into the refuge.
BLM manages oil and gas activities on the refuge and Fish & Wildlife must concur on activities affecting the refuge.
Storage leases would end with production
Unocal has two gas storage facility leases at Swanson River, both limited to injecting gas produced within the field. In a Feb. 15 letter to both agencies, Kevin Tabler, Unocal’s Alaska land manager, told the agencies that expanded gas storage is “an overdue and much needed service” in the area. During the sub-zero cold snap in January, Tabler said, there was “an emergency situation at the Beluga gas field” on the west side of Cook Inlet and 35 million cubic feet a day of gas was needed immediately — a need which was met from Unocal’s Swanson River storage reservoirs.
Had gas from Unocal’s “small pilot program using in-field gas” not been available, he told the agencies, “customers would have been shorted gas, causing potentially significant harm.” This, he said, was the second such event this winter.
“This small pilot program using in-field gas helped us through a difficult time but will not sustain us for the long term,” Tabler said.
More gas will be necessary in Southcentral, he said, but storage will help manage existing reserves.
Unocal requested that authorization to expand gas storage at Swanson River “run concurrently with the terms of the unitized oil and gas leases underlying the Swanson River unit,” so that when the leases expire at the end of oil and gas activity at Swanson River, “the term of the gas storage leases would also expire.”
Unocal is also requesting “expedited review and approval” so that work can begin to address natural gas shortages “caused by growing peak winter demand.”
Swanson has seen large-volume gas imports in past
Historically large volumes of natural gas have been imported into the Swanson River field to maintain reservoir pressure for oil production, Unocal said. A 16 inch natural gas pipeline was constructed in 1964 to bring gas to the field and between 1964 and 1990 some 370 billion cubic feet of gas were imported, with 330 bcf injected and 40 bcf used for field operations. Blow down of the injected gas began in 1993, and Unocal said that since then it has produced 230 bcf of gas for redelivery to Marathon and for use at the Kenai Nitrogen Operations Plant in Nikiski.
Chuck Pierce, then vice president of Unocal’s Alaska operations, wrote to Secretary of the Interior Gale Norton about the issue in December.
“Steps must be taken immediately to address critical natural gas storage needs in order to solve deliverability problems caused by growing peak winter demand,” Pierce said, adding that Unocal would not be able to make “the large financial commitments required to expand gas storage capacity” to meet Southcentral Alaska’s peak winter needs without assurance that gas can be imported into the Swanson River field.
Pierce said Unocal was specifically seeking approval of its third gas storage lease and removal of the prohibition against importing gas from outside the Swanson River field using the existing 16 inch gas pipeline, a condition the agencies imposed when they approved a storage well in June of 2004.
Utilities seeking more natural gas
Pierce said Chugach Electric Association had recently issued a request for proposals for natural gas supplies “in anticipation that current suppliers will not be able to fill the high winter seasonal component of Chugach’s natural gas demand in the near future.” Enstar Natural Gas, the Southcentral gas distribution company, “has entered into and is negotiating for additional incentive-based natural gas sales contracts in anticipation of the region’s impending deliverability shortfall,” he said.
Pierce noted that a Department of Energy study of Southcentral gas supplies completed in June 2004 projected that the area’s large seasonal swings in demand and very limited gas storage could lead to seasonal shortages before 2009.
Unocal has operated the Swanson River field as 100 percent owner since 1992, Pierce said, and the field “has produced oil and gas continuously since its discovery in 1956.”
Unocal began developing the Kenai Gas Storage Facility in the late 1990s and it is the first and only such facility in the region, he said.
Pierce said that BLM approved Unocal’s injection plans, but the U.S. Fish & Wildlife Service has limited gas injection to in-field sources. “While this will meet 2004-05 winter demand, importation of gas from outside (Swanson River) is essential starting in the summer of 2005 in preparation for the 2005-06 winter,” Pierce said. The gas pipeline is already in place, he said, and Unocal has natural gas production in several fields in Southcentral Alaska which it can use for storage.
“It appears the importation of gas produced outside of SRF is the sticking point with USF&WS. They believe that this would constitute a new use of the Refuge and therefore require a compatibility determination followed by all new environmental and right-of-way permitting applications. Such a process could terminate the gas storage project and at best would delay additional gas storage development, making it unavailable in the winter of 2005-06.”
New projects under way at Swanson
Pierce said that importing gas into the Swanson River field is not a new use, but “is consistent with current and historical practice” at the field, with 370 bcf imported between 1964 and 1990.
And, he said, “infrastructure is largely in place for continued import and export” of storage gas. The existing 16 inch gas pipeline would be used, “and all activity will be from existing drilling and development pads.
“If the project is successful, aging pipelines will be replaced in the existing pipeline corridor within the field.” No environmental impact is planned outside of existing roads, pads and utility corridors.
As for the future of exploration and production at Swanson River, Pierce said there are several projects “which will positively impact production from the field.”
In 2003 Unocal launched a shallow gas project which has doubled gas production from Swanson River, he said, and because the price of oil is high the company is taking another look at potential oil development projects including the G Zone oil.
Permitting has been initiated by Unocal and Marathon for two satellite developments, East Swanson and Birth Hills.
Unocal anticipates, Pierce said, that with the success of recent projects and additional oil and gas opportunities, the Swanson River field “will continue to be in production for many years to come.”
But because there are areas within the field which may not be used for any of these purposes, the contraction of the Swanson River footprint “has begun in a well-planned manner.”
And, Pierce said, Swanson River storage ties into a North Slope gas pipeline. It would allow, he said, construction of a smaller diameter pipeline to Southcentral for base load needs, with storage allowing “the pipeline to operate at a steady rate, decreasing the operational challenges of both North Slope gas production and the pipeline.” Storage will also, he said, provide necessary redundancy in the event of interruptions in North Slope gas pipeline deliveries.
