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Harvest buys mothballed Nikiski plant to import LNG using tankers
Alan Bailey for Petroleum News
On Nov. 11 Harvest Midstream announced that it had completed the acquisition of the Kenai LNG facility in Nikiski on the west coast of the Kenai Peninsula. Harvest, the pipeline affiliate of Hilcorp Alaska, plans to convert the facility, currently a mothballed LNG export facility, into an LNG import facility, in response to anticipated drops in Cook Inlet natural gas production.
As previously reported by Petroleum News, Harvest recently put into operation an LNG production facility that it has constructed on the North Slope for the delivery of LNG by road tanker to Fairbanks. However, given the scale of gas demand in Southcentral Alaska, this type of road delivery does not appear to be a practical solution for meeting Southcentral's future gas needs. Hence the requirement for the import terminal.
"Today's announcement is another milestone in delivering real energy solutions for Alaska and advancing America's energy infrastructure," said Jason C. Rebrook, Harvest CEO. "Earlier this year we delivered the first ever North Slope LNG to Fairbanks and now we are building on that momentum by putting existing LNG infrastructure back to work to help meet Southcentral Alaska's near-term gas needs and strengthen long-term reliability for the state."
In February Harvest and Anchorage-based Chugach Electric Association announced an agreement with Marathon Petroleum Corp, the then owner of the LNG facility, for Harvest to acquire the facility for use for LNG importing. The LNG terminal first went into operation in 1969 as a means of exporting natural gas to Japan during the heyday of Cook Inlet gas production. But with the later decline in production, the terminal stopped operating in 2016 and since then it has remained in long-term warm shutdown mode.
FERC approval sought The deal for the Hilcorp purchase of the LNG facility involved the transfer to Hilcorp of ownership of Trans-Foreland Pipeline Company, the Marathon subsidiary that legally owned the facility.
According to Federal Energy Regulatory Commission filings, in 2020 FERC had authorized Trans-Foreland to convert the facility into an LNG import facility, with an anticipated startup date by Dec. 17, 2022.
However, in 2022 FERC granted Trans-Foreland a three-year time extension because of the economic impacts of the COVID-19 pandemic and the volatility of the LNG market.
Trans-Foreland, now owned by Hilcorp, has requested FERC approval of an extension of the facility startup deadline until Dec. 17, 2028. FERC invites public comments on Trans-Foreland's request by Dec. 2 and anticipates issuing an order in response to the request within 45 days.
New sources of gas needed Chugach Electric urgently needs new sources of natural gas, the primary fuel for its power generation facilities.
The utility does obtain 50% of its gas from the Beluga River gas field, in which it has a two-thirds working interest ownership. But the utility also obtains a significant amount of gas through a firm supply contract with Hilcorp that expires on March 31, 2028.
Although Hilcorp will presumably be able to continue to produce gas, the company has previously indicated that it will not be able to extend its existing firm supply contracts.
The utilities need firm gas supplies to fully meet their needs while ensuring the reliability of their services.
Glenfarne LNG import facility Meanwhile Southcentral natural gas utility Enstar Natural Gas Co. is working with Glenfarne Energy Transition to develop a new LNG import facility at another location on the shores of the Cook Inlet.
In a separate project Glenfarne is also working with Alaska Gasline Development Corp. on the potential development of a gas pipeline from the North Slope to the Cook Inlet. If the pipeline is completed, the planned LNG import terminal could be converted to an export terminal.
Chugach Electric expects to need to bolster its firm gas supplies several years prior to the anticipated completion of the Glenfarne import facility -- hence the need for the Nikiski facility. Enstar, on the other hand, anticipates it and Chugach Electric together having to import more LNG than the Nikiski facility would be able to handle -- hence the need for the Glenfarne facility.
Scale of Nikiski facility Harvest said that its acquisition of the Nikiski LNG terminal site includes about 100 acres of industrial water front, 107,000 cubic feet of LNG storage capacity and a legacy dock infrastructure historically capable of handling LNG tankers carrying LNG equivalent to about 2.9 billion cubic feet of natural gas.
In the summer of this year the company completed a full inspection of the onshore facility and dock infrastructure. The company is seeking an amendment to the existing Federal Energy Regulatory Commission permit for the facility to increase the facility's import capacity. The company says that it is "in advanced talks with global LNG suppliers and potential offtake customers."
"Harvest is targeting a final investment decision in the second quarter of 2026 and first LNG imports in the first half of 2028," the company says.
-ALAN BAILEY
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