CINGSA short of base gas for facility

Construction work near complete in July; base gas fill delayed because contracted gas not delivered, more sought from producers

Kristen Nelson

Petroleum News

Cook Inlet Natural Gas Storage Alaska, CINGSA, told the Regulatory Commission of Alaska Aug. 13 that it has not received the base gas it needs to ensure gas can be withdrawn by customers at optimum rates this coming winter.

The natural gas storage facility, designed to hold up to 11 billion cubic feet of working gas, officially began operations May 31.

CINGSA said that while the commission has closed the docket and progress reports are not required, it will continue to file monthly reports until the facility is fully operational.

The issue with base gas began in March 2011 when CINGSA contracted with an unnamed Cook Inlet producer to provide 3.24 bcf of base gas.

“Sufficient base gas is needed to ensure that pressures in the storage reservoir are high enough to permit customers to withdraw gas from the CINGSA Storage Project within design parameters,” CINGSA told the commission.

However, the producer with which it contracted “now asserts that, under this agreement, it had the option to sell the base gas to CINGSA but not the obligation to do so,” a contention with which CINGSA said it disagrees.

“CINGSA believes that gas intended to be sold to CINGSA has instead been exported to Japan as LNG at a substantially higher price than CINGSA had agreed to pay,” it told the commission.

Withdrawal service available

CINGSA said it has secured 5 bcf of base gas, including 0.5 bcf of base gas under a July 11 contract with ConocoPhillips Alaska. Deliveries of that gas are expected beginning in August.

CINGSA said it is attempting to secure additional base gas “from various Cook Inlet area producers, so that gas can be withdrawn by customers from the CINGSA Storage Project at optimal rates during the 2012-13 winter heating season.”

July work

Subsurface engineering work during July included re-perforation of wells 2, 3, 4 and 5 to improve injection and withdrawal capability. All wells showed improved deliverability following the work, CINGSA told the commission; the same work is planned for well 1 as soon as a coiled tubing unit is available.

CINGSA said it has received one or two noise complaints from nearby residents and “is in the process of identifying and implementing sound attenuating devices to reduce noise levels further.”

The compressor plant was idle during a scheduled shutdown of the Kenai Nikiski Pipeline and another round of sound level data was collected then, with some of the sampling focused on the area where residents had complained.

All station piping was completed in July, and with construction work completed in the month, CINGSA said surface facilities are approximately 93 percent complete.

The CINGSA owners are Semco Energy, MidAmerican Energy Holdings Co., Cook Inlet Region Inc. and First Alaska Capital Partners.

RCA approves ownership changes

A Feb. 1 agreement provided for acquisition by AltaGas U.S. of 100 percent of the outstanding shares of common stock of Semco Holding, which holds 100 percent of the outstanding shares of Semco, with AltaGas U.S. replacing Continental Energy Systems LLC as owner of Semco Holding and through Semco controlling Enstar and Alaska Pipeline Co.

In comments on the proposed sale the Municipality of Anchorage, doing business as Municipal Light & Power, told the commission that it is critical that an entity owning Enstar demonstrate willingness to commit resources necessary to meet the challenges of supplying and transporting natural in Southcentral Alaska and said the commission should require applicants to file five-year capital improvement plans for Enstar and commit to providing support to Enstar to participated with other utilities in coordinated gas supply planning efforts.

AltaGas told the commission it was fully aware of the challenges described in ML&P’s comments and was willing to work cooperatively with Southcentral utilities to overcome those challenges, but said submission of a five-year plan at this stage was not practical. It said that upon approval of the sale it would see to it that Enstar and Alaska Pipeline Co. “continue to contribute their fair share to those important efforts.”

AltaGas Ltd. is a Canadian company headquartered in Calgary, Alberta, common stock and preferred shares traded on the Toronto Stock Exchange. Through subsidiaries it provides retail natural gas service to some 115,000 customers in Alberta, British Columbia, Nova Scotia and the Northwest Territories.

AltaGas U.S. is a Delaware limited liability company formed in January for the purpose of holding AltaGas Ltd. utility investments in the U.S. and is wholly owned by AltaGas Ltd. The commission also approved acquisition by AltaGas of a controlling interest in Cook Inlet Natural Gas Storage Alaska LLC. Semco controls 65 percent of CINGSA through an indirect subsidiary.

—Kristen Nelson