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North Slope LNG plant goes into operation supplying Fairbanks gas
Alan Bailey for Petroleum News
On Oct. 9 Harvest Midstream and Interior Gas Utility announced that Harvest's new liquefied natural gas plant on the North Slope had gone into operation, producing LNG for delivery by road tanker to Fairbanks based IGU. IGU has contracted a new LNG trucking operation from the Slope.
"For the first time in history, North Slope gas isn't just staying on the Slope -- it's reaching beyond to power Alaska's future," said Jason Rebrook, Harvest CEO. "This project unlocks clean, reliable energy for Interior families and businesses and shows what's possible when we work together to build Alaska's energy security."
"Bringing North Slope natural gas into Fairbanks is a historic step for Interior Alaska but also for our state as a whole," said Elena Sudduth, general manager of IGU. "This project gives our community access to a new, virtually unlimited source of gas, strengthening our resilience and ensuring our customers have access to reliable service as Alaska's energy landscape continues to evolve."
Switch from Cook Inlet to North Slope gas Until the switchover to North Slope supplies IGU had been obtaining LNG from its LNG plant near Point Mackenzie, using Cook Inlet gas supplied by Hilcorp Alaska. IGU trucked the LNG to IGU storage facilities in central Fairbanks and North Pole. IGU had been planning to expand its Point Mackenzie plant to support steadily increasing gas demand in the Fairbanks.region.
But in 2022 Hilcorp Alaska, the dominant Cook Inlet gas producer, indicated that there was uncertainty over the adequacy of Cook Inlet gas supplies beyond the terms of current gas supply contracts. As a consequence IGU decided to move its gas supplies from the Cook Inlet to the North Slope, signing contracts with Hilcorp for the supply of North Slope gas and with Harvest, a Hilcorp affiliate, for the production of LNG from a planned new LNG facility on the Slope.
The contracts involve an initial 20-year timeframe, with agreed pricing for gas delivered to the North Slope LNG facility and for LNG supplied on the North Slope from the facility. The contracts factor in long-term price escalation to take inflation into account. The consequent initial pricing for gas in Fairbanks was projected to be similar to the price of gas obtained from the Cook Inlet.
The new LNG plant Harvest's new LNG plant, situated on a gravel pad near Deadhorse, can produce up to 150,000 gallons per day of LNG, more than triple the capacity of IGU's Point Mackenzie facility. This will obviously enable the new plant to accommodate significant future increases in gas demand in the Fairbanks region. Also, the new LNG facility has been designed for future expansion, should that be required, Harvest said.
Southcentral electricity and gas utilities are planning to import LNG from outside Alaska, in response to dwindling Cook Inlet gas supplies, with the future possibility of obtaining North Slope gas by pipeline, should a trans-Alaska gas pipeline be built. In a recent public meeting of the Regulatory Commission of Alaska, John Sims, president of Anchorage based Enstar Natural Gas Co., commented that Enstar's customer base is around 50 times the size of that of IGU. Consequently, the massive scale of any LNG trucking operation from the North Slope to Southcentral, to replace Cook Inlet gas supplies, would appear impractical.
Interior Energy Project Upgraded natural gas supplies in the Fairbanks region come as a consequence of the Interior Energy Project, an Alaska Industrial Development and Export Authority sponsored project designed to bring increased supplies of affordable natural gas to the region. The concept has been to encourage residents and businesses in the region to switch from expensive and unstably priced oil for heating buildings.
Clean burning gas can also replace the use of wood burning stoves. Fairbanks suffers from severe air quality problems, especially during the winter, because of the use of pollutant generating fuels.
Initially the IEP, authorized by the Alaska Legislature in 2013, was going to involve the construction of an LNG plant on the North Slope. And work commenced on the expansion of the gas distribution network in central Fairbanks and North Pole. However, in 2015, following a determination that the North Slope LNG project would likely be uneconomic, the Legislature switched the plan to the increased use of Cook Inlet gas -- Fairbanks utilities had already been obtaining gas from the Cook Inlet in the form of LNG.
Consolidation of Fairbanks utilities Consequently, AIDEA purchased Pentex Natural Gas Co., the owner of the Point Mackenzie LNG plant, the LNG trucking operation to Fairbanks and Fairbanks Natural Gas, a private utility.
In 2018 IGU, a Fairbanks North Slope Borough public gas utility, purchased the Pentex assets from AIDEA, thus creating a single gas utility for the Fairbanks region.
IGU continued to pursue the Interior Energy Project with AIDEA as a project sponsor.
Key components of the continuing project were the construction of a major new LNG storage facility in central Fairbanks and the construction of LNG storage facilities at North Pole. Meanwhile, IGU's customer base has been steadily rising, with a supporting expansion of the gas supply pipeline infrastructure.
Project funding Of the Legislature's original $57.5 million capital appropriation for the IEP, $14 million was spent on the original project for developing a North Slope LNG plant and on the initial expansion of the Fairbanks and North Pole gas distribution systems. $3.1 million was spent on subsequent developments relating to the supply of Cook Inlet gas to Fairbanks, including the construction of expanded LNG storage facilities that will now be used for the storage of North Slope gas in Fairbanks and the North Pole. There was also funding assistance for IGU's purchase of the Pentex assets, with the use of AIDEA Sustainable Energy Transmission and Supply Development Fund loans being made available for that purchase and for the expansion of the gas distribution infrastructure. IGU has also issued its own revenue bonds, in particular to fund the installation of gas mains and service lines.
The upshot of all of this has been a significant and steady increase in the use of natural gas as fuel in the Fairbanks region, as envisaged by that initial legislation in 2013.
-ALAN BAILEY
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