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Fairbanks gas finalists selected
The Alaska Industrial Development and Export Authority has selected five businesses as finalists for evaluation of proposals for the delivery of natural gas to the City of Fairbanks. The selection comes as part of the Interior Energy Project, an initiative to bring affordable energy to Fairbanks and the surrounding region of the Alaska Interior.
The finalists are Harvest Alaska LLC, an affiliate of Hilcorp Alaska LLC; Phoenix Clean Fuels LLC; Salix Inc.; Spectrum LNG LLC; and WesPac Midstream LLC. All of the proposals involve the production of liquefied natural gas for use in Fairbanks, with two companies proposing an LNG plant on the North Slope and three companies proposing LNG from Cook Inlet. However, WesPac has also suggested the possibility of importing cheap LNG from Canada.
AIDEA says that it and the Alaska Interior utilities will immediately begin discussions with the finalists, with the objective of achieving in October the best and final project offer for each gas supply option. That should lead to a recommendation to the AIDEA board in December for a partner for the gas supply component of the Interior Energy Project, AIDEA says.
Harvest/Hilcorp Harvest and Hilcorp have proposed building a Cook Inlet LNG facility with a 100,000 or 200,000 gallons-per-day capacity.
The companies have proposed three option scenarios for implementing the LNG plant. The primary option is to build and operate the plant as a facility available for the use of owners of Cook Inlet gas. A second option would be to also provide services for the transportation of LNG from the plant to Fairbanks. And a third option would be offer LNG for sale from the LNG plant itself. Other than in the primary option, Hilcorp would provide gas for the LNG plant from the company’s Cook Inlet oil and gas fields.
Under the primary option, Harvest would initially charge a fee of $4.95 per thousand cubic feet of natural gas processed into LNG. Under the second option, Hilcorp would offer a fixed price of $15 per mcf of gas, delivered as LNG at the Fairbanks city gate, with that price escalating at 2 percent annually. Under the third option, Hilcorp would make LNG available for loading into ISO containers for shipment by rail or road at a base price of $12.25 per mcf, with the possibility of periodic adjustments to the rate.
The companies think that it would be possible to deliver first gas to the Fairbanks region within 14 to 18 months of finalizing agreements for the project. The project, as it stands, would not require AIDEA financing, although financing alternatives could improve the project economics, the companies say.
Phoenix Clean Fuels Phoenix Clean Fuels consists of a group of companies that say that they have the combined expertise to build an LNG plant on the North Slope and establish a trucking operation for transporting the LNG to Fairbanks. Companies involved consist of Scimation, TDX Power, Norgasco, General Electric Oil and Gas, SLR Consulting, Alaska Industrial and Crowley Marine. Some of these companies have existing experience with the North Slope LNG concept, having been involved in a previous effort by AIDEA to pursue the North Slope option.
Phoenix says that it anticipates delivering LNG to Fairbanks in 2020 at a city gate gas price of $10 per mcf, assuming an initial capacity of 6 billion cubic feet per year for the North Slope LNG plant. The costs are based on the installation of a General Electric Oil and Gas “plug and play” modular LNG plant on an existing gravel pad on the North Slope. Capital cost of the project would be $115 million, with the possibility of expanding the LNG plant to a 9 bcf per year capacity for an additional $52 million.
Assuming that the project kicks off in January 2016, first gas could be delivered in Fairbanks in the fourth quarter of 2017, Phoenix says. The project would be funded through an AIDEA equity stake and through AIDEA loans.
Salix Salix, a subsidiary of electric and gas utility company Avista Corp., is proposing to build an LNG plant in the Cook Inlet region, with an initial capacity of 200,000 gallons per day, expandable to 400,000 gallons per day. The company says that its financial model indicates a 20-year average liquefaction price of $2.87 per mcf of gas for the 200,000 gallons-per-day plant. That estimate is based on a capital cost for the plant of $115 million, $20 million of which would be a Salix investment, with the remainder coming from AIDEA equity and bond financing. However, depending on the economics, Salix would consider substituting third-party financing for AIDEA financing, the company says.
Spectrum Spectrum LNG, a major U.S. LNG producer, built a small Cook Inlet LNG plant in the 1990s. That plant is currently owned by Pentex Alaska Natural Gas Co., a company that AIDEA is in the process of purchasing as part of the Interior Energy Project. In 2013 Spectrum had proposed to AIDEA the construction of a North Slope LNG plant for supplying LNG to Fairbanks, but AIDEA opted instead to commission engineering firm MWH to pursue the Fairbanks LNG option.
Spectrum, in its new proposal to AIDEA, says that it has investigated both the Cook Inlet and North Slope LNG options for Fairbanks and concluded that a Prudhoe Bay plant would deliver cheaper gas to the Interior city “by a significant margin.” The company’s proposal is essentially a rerun of its 2013 concept, with a plan to build an LNG facility on a site that the company had leased for the purpose but later transferred to AIDEA.
The company says that its proposed two-train LNG plant would have a liquefaction capacity of close to 7 bcf per year.
Based on a capital structure involving $45 million in AIDEA equity funding and $35 million in AIDEA bonding for a total capital cost of $80 million, Spectrum thinks that it can deliver LNG to the Fairbanks city gate at a price below $8 per mcf of gas, once the plant is running at full capacity.
If mobilization of construction were to start in March 2016, sustained production could be established around December 2016/January 2017, the company says. Spectrum is only targeting construction of the LNG plant, but would be willing to coordinate truck transportation and LNG trailers for shipping the LNG to Fairbanks by road, the company says.
WesPac WesPac Midstream LLC, a company with major North American LNG experience, proposes building an LNG facility at Point MacKenzie on Cook Inlet, with construction in two phases. Phase one would be capable of producing 200,000 gallons per day by the first quarter of 2018, with a phase two expansion by an additional 100,000 gallons per day by 2022, depending on LNG demand.
The primary option for the company’s proposal does not include either feedstock gas for the plant or the transportation of LNG to Fairbanks. The fee for gas liquefaction and storage services would be $4.46 per mcf. An alternative option would add a long-term gas supply from WesPac’s planned gas production from Cook Inlet’s Cosmopolitan field and the transportation of the LNG to Fairbanks, with an estimated city gate price of $12.25 per mcf.
A second alternative would source LNG from the Tilbury LNG plant near Vancouver, British Columbia - LNG would be delivered to Fairbanks from Tilbury as early as January 2017, using ISO containers shipped by barge and by railcars or trucks. The estimated city gate cost of gas under this scenario would be $11.08 per mcf, with this cost reflecting the relatively low price of gas in Canada.
WesPac’s economic calculations assume that 63 to 70 percent of the project capital cost would come from AIDEA financing, with WesPac providing the remainder of the capital investment.
- ALAN BAILEY
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