A sense of urgencyAlaska Railbelt utilities are still concerned about long-term gas supplies Alan Bailey Petroleum News
Although Hilcorp Alaska’s aggressive development program in the oil and gas fields of the Cook Inlet basin is now assuring gas supplies for local utilities through to March 2018, the utilities are unclear how their gas supply needs will be met after that time. And with a lead time of perhaps three years to establish alternative sources of gas, should supplies from Cook Inlet fall short of requirements, the utilities are continuing to investigate the possibility of importing gas into the region.
Railbelt electrical power comes predominantly from gas fired power stations, while people in Southcentral Alaska mostly use natural gas to heat buildings. But, as production from aging Cook Inlet fields has declined, gas supplies from the Cook Inlet basin have dwindled to worryingly low levels.
Before Hilcorp’s development program came into action, the utilities had anticipated the possibilities of shortfalls in gas deliveries as early as the winter of 2014-15. Hilcorp, a relative newcomer to the Cook Inlet basin, has purchased oil and gas fields in the basin that had belonged to Chevron and Marathon Oil and is now the dominant gas producer in the basin.
New contracts Enstar Natural Gas Co., Chugach Electric Association and Matanuska Electric Association have now all signed contracts with Hilcorp for gas supplies to 2018, and the Regulatory Commission of Alaska has approved the contract with Enstar. The commission has yet to rule on the other contracts.
During a talk at the Alaska Critical In-State Energy Summit on Sept. 16, Jim Posey, general manager of Anchorage electric utility, Municipal Light & Power, reflected on the changes, as Hilcorp has geared up its oil field activity.
“We went from a sense of emergency … to a sense of urgency,” Posey said.
Joe Griffith, general manager of Matanuska Electric Association told the In-State Energy Summit that obtaining gas from Cook Inlet is the preferred solution to long-term gas supplies. But, if that does not prove possible, some form of importation arrangement would be an alternative. The utilities have been considering the possibility of importing liquefied natural gas, probably from western Canada, into Southcentral, a proposal that has been met by gasps of horror by some people in the state.
People in the state administration “get all tensed up about it,” Griffith said. “I can understand, but for heaven’s sakes, we’ve got to keep the lights on.”
There are also proposals to bring North Slope gas to Southcentral Alaska by pipeline, either as an in-state line or as an offshoot of a major gas line for exporting gas from the Slope.
Four large fields During a talk to the Commonwealth North Energy Action Coalition on Sept. 13 John Lau, Enstar’s director of engineering, commented that Cook Inlet gas supplies are still heavily dependent on four large gas fields: the Kenai, North Cook Inlet, Beluga and Trading Bay fields. The combined size of these fields, all discovered several decades ago, amounted to 7.5 trillion cubic feet of gas, with the remaining fields in the Cook Inlet basin only contributing about another 1.5 tcf, Lau said. The last discovery of a gas field more than 1 tcf in size was in 1965, Lau said.
Smaller field have been discovered more recently, but many of these fields would be needed to make total gas reserve increments that compare with the large fields, he said. For example, the construction of the Kenai Kachemak Pipeline about 10 years ago started to open up new gas developments in the more southerly part of the Kenai Peninsula: There are now 10 or 11 properties in that area that have been developed or have development potential, Lau said. But, the total contribution of these developments to overall gas reserves amounts to about 250 billion cubic feet, not the trillion cubic feet or more that would be equivalent to the old legacy fields that are now in a serious state of decline, he said.
New exploration Exploration for new oil and gas is taking place in the basin — Furie Operating Alaska has announced a gas find in its offshore Kitchen Lights prospect, Nordaq Energy is developing a new gas field in the northern Kenai Peninsula and Buccaneer Energy has a gas resource in its Cosmopolitan prospect, offshore the southern Kenai Peninsula. But none of these companies has yet published any gas reserves figures for its find, and in the absence of published reserves predicting the contributions that new fields can make to future gas supplies becomes an exercise in speculation.
Clock ticking Meantime the clock is ticking for fields that are in production.
The total maximum gas deliverability, the rate at which gas can be delivered from the gas fields, has declined from nearly 1 billion cubic feet per day in 1997 to somewhere around 270 million to 280 million cubic feet per day at present, Lau said. And, with the possibility of the Southcentral utilities needing up to perhaps 425 million cubic feet per day in a worst-case winter cold snap, the utilities now depend on the 140 million to 150 million cubic feet per day that could be delivered from the new Cook Inlet Natural Gas Storage Alaska, or CINGSA, storage facility on the Kenai Peninsula, he said.
“We’re right on the cusp,” Lau said.
CINGSA stores surplus gas produced in the summer and then releases that gas in the winter when gas demand is high.
Options needed With a duty to ensure continuity of energy supplies for their customers, the utilities, unable to make assumptions about what new gas reserves might come on line from Cook Inlet exploration, are looking to options such as the import of liquefied natural gas for future gas supplies. And, with sizable lead times and high potential costs, the utilities need to move forward on these alternatives well before gas shortages hit the region. The time horizon for establishing an import arrangement might be three to four years, with a project cost of perhaps $100 million or $200 million, Lau said.
And so, while the Hilcorp contracts have provided some breathing room, enabling the process of establishing alternative gas supplies to slow down, the utilities still need to make sure that the import option remains available, Lau said.
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