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Vol. 18, No. 18 Week of May 05, 2013
Providing coverage of Alaska and northern Canada's oil and gas industry

Looking at the options

Southcentral utilities review evolving Cook Inlet gas supply situation

Alan Bailey

Petroleum News

With some Southcentral Alaska utility executives presumably sighing with relief as the weather warms after a winter that saw no shortfalls in Cook Inlet utility gas supplies, utility staff are busy planning for the next winter, as well as evaluating how to keep adequate gas flowing in years to come. The utilities have been facing something of a fuel supply crisis as gas production from aging Cook Inlet gas fields declines.

During a meeting of the Anchorage Mayor’s Energy Task Force on May 1, the utilities explained some of their plans, hinting at some progress in dealing with short-term gas supply needs while also explaining some of the gas supply challenges.

In terms of progress, there was mention of discussions between the utilities and Hilcorp Alaska, the company that has now completed its takeover of Cook Inlet oil and gas fields previously owned by Chevron and Marathon Oil Co. Hilcorp has embarked on an aggressive program of field development, with expectations of boosting Cook Inlet gas production. The utilities have yet to announce any new gas supply contracts with Hilcorp, but during the Energy Task Force meeting there was mention of the possibility that adequate Cook Inlet gas supplies can now be maintained through to 2018 — the utilities have previous projected shortfalls in gas deliverability, the rate at which gas can be delivered, as early as the winter of 2014-15.

CINGSA

During the past winter the new Kenai Peninsula gas storage facility operated by Cook Inlet Natural Gas Storage Alaska, or CINGSA, played a vital role, filling what would otherwise have been gas deliverability gaps during cold weather, especially in December. The CINGSA facility first went into operation in April 2012, injecting excess summer gas into its underground reservoir for winter use.

John Lau, director of engineering for Enstar Natural Gas Co., Southcentral’s main gas utility, told the Energy Task Force that, overall, the winter had been less cold than had been allowed for in the storage facility’s design. But, because of some difficulties with the purchase of pad gas, the gas permanently stored in the facility to maintain reservoir pressure, the facility did not acquire its full quota of pad gas until February or March of this year, Lau said. Those pad-gas purchase issues have now been resolved, he said.

Lau said that the storage facility’s current gas capacity of 11 billion cubic feet compares with a total annual demand of around 80 billion cubic feet for Cook Inlet gas. And, with production wells at the facility able to deliver gas faster than typical gas field wells, the facility can supply gas at a rate of around 150 million cubic feet per day early in the winter season. That rate declines to about 110 million cubic feet per day later in the season, as the pressure drops in the storage reservoir. Those supply rates can amount to about 30 percent of gas demand on a particular winter day, he said.

It would be possible to expand the facility’s capacity to 18 billion cubic feet by drilling additional wells. But the cost of such an expansion would need to be justified by a demand for additional gas storage, Lau said.

Transmission ring

CINGSA is plugged into the Southcentral gas pipeline network at a location to the south of the city of Kenai, at the southwestern perimeter of a ring of gas transmission pipelines that connects gas fields on the west and east sides of Cook Inlet with major population centers in Anchorage and the Matanuska-Susitna Valley.

On the southeast side of the ring two transmission lines carry gas from the east side of Cook Inlet through the northern Kenai Peninsula, under Turnagain Arm and into Anchorage. These lines, with a current carrying capacity of around 230 million cubic feet per day, funnel the bulk of Anchorage’s gas supply into the city. Enstar plans to increase the capacities of these lines to around 250 million cubic feet per day in the next year or two, an upgrade driven to a significant extent by the location of the CINGSA facility near Kenai, Lau said.

Need gas from west

But during cold winter weather the maximum throughput of the lines through the northern Kenai Peninsula is insufficient to meet all of Anchorage’s gas demand. Consequently, some gas has to move clockwise around the gas transmission ring, with gas flowing north from the west side of Cook Inlet through an Enstar 20-inch-diameter transmission line that connects to the Matanuska-Susitna valley communities and hence to Anchorage. This line was installed in 1984 to bring gas from the Beluga River and Trading Bay fields to market, Lau said. But, with gas production on the west side of the inlet in decline, Enstar’s transmission line on the west side is now substantially under used, he said.

CIGGS

Completing the gas transmission ring by connecting the west side and east side pipelines is the Cook Inlet Gas Gathering System, or CIGGS, a pair of high-pressure transmission lines that runs under the Cook Inlet north of Kenai. The system was built in the early days of the Cook Inlet gas industry to move gas east from Trading Bay on the west side of the inlet to a fertilizer plant at Nikiski on the Kenai Peninsula. But in 2011, with funding assistance from the state, a new gas compressor was installed on the Kenai Peninsula to enable gas to flow east to west through CIGGS, rather than just west to east as previously. The prime purpose of the upgrade was to ensure adequate gas supplies for Chugach Electric Association’s gas-fired power station on the west side of the inlet.

But with the new compressor only able to push 50 million to 60 million cubic feet per day east to west through CIGGS, limitations on east-to-west flow through the system have created a bottleneck in flowing gas clockwise around the gas transmission ring, thus continuing the significant under use of Enstar’s 20-inch line on the west side of the inlet, Lau explained. An upgrade of the CIGGS east-to-west compression capabilities, costing perhaps costing $10 million to $15 million, could increase the east-to-west capacity to, say, 200 million cubic feet per day, he said. And although Hilcorp, the owner of CIGGS would obviously have to be able to recover the cost of any upgrade, an upgrade of this type would likely be more cost effective in shipping additional gas north than continuing to try to increase pipeline capacity through the northern Kenai Peninsula, he said.

No redundancy

Increased capacity on CIGGS would also alleviate major concerns among the utilities about the lack of redundancy in the current transmission system for delivering gas to Anchorage. The two submarine pipeline systems — CIGGS and the lines under Turnagain Arm — while apparently in good condition, are both old. Currently, a failure of either of these pipelines would cause major problems for gas supplies to Anchorage, Lau commented.

Enstar is currently in discussion with Hilcorp, figuring out the best locations in the pipeline network for future gas compression, he said.



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