REI’s goal to go to FEED for LNG in June

Company’s Port MacKenzie-based project would take Cook Inlet natural gas to Japan as LNG, with first shipment planned for 2020

Kristen Nelson

Petroleum News

Resources Energy Inc. is focused on producing liquefied natural gas for the Japanese utility market from Cook Inlet, and hopes to go to front-end engineering design this summer, Mary Ann Pease, REI vice president and the company’s Anchorage general manager, told the House Special Committee on Energy in a March 24 presentation.

Japanese utilities started looking at opportunities right after the Fukushima disaster in 2011 and the focus was initially on North Slope natural gas, she said, but short-term focus is now on Cook Inlet gas, with a 1 million ton per annum greenfield plant planned on land adjacent to Port MacKenzie.

Pease said REI has an option on land adjacent to Port Mackenzie through the end of the year. Golder Associates is doing geotechnical work at the proposed site. With the weight of an LNG plant, she said, it is necessary to be sure soil conditions are very stable.

REI’s option is on property to the left of the port, Pease said, with easy access to loading and offloading. But she said the LNG facility will need a dedicated dock, since you can’t have a joint-use dock for an LNG facility. The advantage of being near Port MacKenzie is the ease of bringing in needed materials, she said, and the fact that you can drive there.

REI is looking at a modular LNG plant, Pease said, because of the cost of building from scratch in Cook Inlet. The estimated cost is $1.8 billion and the facility would be about the same size as the existing ConocoPhillips LNG plant at Nikiski, she said.

A relatively small plant would allow REI to get up and started in a short time because a smaller project could move a lot quicker than a mega project, Pease said. Nine miles of pipe would be required to bring natural gas to tidewater.

Pease said REI would need to aggregate Cook Inlet production, bringing together some of the smaller producers. She said some 160 million cubic feet of natural day a day would be needed, and said REI was looking at NordAq, Cook Inlet Energy, BlueCrest and Hilcorp. (Of the four, Hilcorp and Cook Inlet Energy are current producers.) While Hilcorp has substantial gas reserves, companies smaller than Hilcorp would require aggregation, she said.

Pease said discussions with Cook Inlet producers continue to be very positive with letters of interest in delivering natural gas from all of them.

The Alaska Industrial Development and Export Authority has been working with REI since April of 2014 on the proposed facility and at a Dec. 16 board meeting agreed to increase its investment in the project. Under the original funding agreement AIDEA committed to pay 25 percent of the cost up to $220,000 for studies leading to decisions over financing of the project, but in December AIDEA increased its investment to 25 percent of an estimated $440,000.

Pease said REI was looking at front-end engineering design starting this year, although she said the date has been pushed back from March and now will probably begin in June, due to discussions over a modular facility.

A request to the Federal Energy Regulatory Commission for pre-filing is scheduled this year, along with an application to the Department of Energy for export, according to materials REI presented to the Energy Committee. The FERC pre-filing and formal applications are expected in 2016, with FERC issuance of a final environmental impact statement in 2017, along with authorizations from FERC and DOE. Construction would be in 2018-19 and first LNG in 2019-20.

The project is planned as a public-private partnership with equity participation from prefecture governments in Japan, ERI and Japanese companies, as well as from U.S. companies and Alaska state agencies.