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Inlet gas supply study under way Gas demand under review; include spur from Fairbanks and imported LNG Patricia Jones Petroleum News Contributing Writer
Technical consultants hired by the U.S. Department of Energy started work in mid-August on a fast-track, $500,000 study of future demand and supply of natural gas in Southcentral Alaska.
The study, scheduled to be concluded next April, is the first phase of a three-pronged project that will outline a preliminary design for a pipeline spur between Fairbanks and Anchorage, should a North Slope to the Lower 48 gas pipeline project be built.
“We’re going to take a real serious look at the supply situation at Cook Inlet … to look at various options to meet our needs, both for primary users and industrial growth in Southcentral Alaska,” said Charles Thomas, study project manager and a technical consultant to DOE. “One option is to try to bring North Slope gas into the region … there may be other potential options.”
Funding for the second and third phases of the pipeline spur study has not been appropriated, according to Brent Sheets, federal co-chair of the study group and regional manager of DOE’s Arctic Energy Office in Fairbanks.
The $500,000 for the Southcentral Alaska supply and demand study is part of $2 million requested from DOE by U.S. Sen. Ted Stevens, R-Alaska, for natural gas pipeline research in Alaska. An additional research project is being finalized through DOE’s Arctic Energy Office for funding in the current fiscal year, Sheets said.
Enstar Natural Gas Co. proposed the conceptual study of a pipeline spur that would provide North Slope gas to the Anchorage bowl area. Enstar to lease second phase Enstar is expected to lead the second study phase, should it be funded, according to the project summary.
The second phase would include preliminary engineering, permitting and right of way options for two pipeline spur routes — 325 miles from Fairbanks to Wasilla, or 290 miles from Delta Junction to Palmer.
The third study phase would include assessment of economic impact to communities along the proposed route, structure of potential ownership, pipeline operatorship, funding mechanisms, tariff structure and potential market analysis.
Gas shortfall approaching While construction of an Alaska North Slope gas pipeline project remains an unknown future prospect, the demand for gas in the Anchorage bowl area is a more immediate known need which the DOE-funded study will address.
Cook Inlet supply estimates released by the Alaska Department of Natural Resources in a 2000 annual report show a “rather sharp decline beginning now, in 2003,” Thomas said, in a phone interview with Petroleum News on Aug. 13. “If there starts being a supply constraint in this region, who gets cut off first? It’s obvious we need to do something in the fairly short term and in the long term.”
The supply study’s summary cites those department estimates, which conclude that reasonable rates of decline for the existing Cook Inlet reserves base of 2.148 trillion cubic feet would result in annual deliverability shortfalls by 2004 to 2005 without new discoveries.
Discoveries that total an additional 1 tcf would provide a four to five year buffer, forestalling shortfalls until about 2009, according to the study summary.
“Exploration activity is going on and there’s been some success, but no one has discovered a large gas field in the last few years that’s been announced,” Thomas said. “There’s concern that something needs to be done — either exploration firms need to be very successful in the short term, or we need to look at a longer-range option.”
Other options The first phase of the DOE study will look at options for maintaining gas supplies in the Anchorage area, including a detailed analysis of remaining reserves, potential reserve additions in current fields and the potential for reserve additions through exploration. The group will also analyze the minimum economic field size for the region and gas prices and other cost factors necessary to motivate industry to aggressively explore.
“Right now, gas is pretty cheap,” Thomas said. “What will the value need to be to justify a spur pipeline?”
In addition, the technical group will also consider other options to boost gas resources in the Anchorage area. Those could include development of coalbed methane in the neighboring Matanuska-Susitna area, replacing some gas-fired electric generation with wind or coal-fired power plants and imports of liquefied natural gas.
“Importing natural gas to Alaska would seem like a bad situation — no one would like that,” he said. “There’s very likely lots of options for supply but what are the associated costs?” Steering committee included Thomas is heading up a team of four technical consultants who will complete the research and analytical portion of the first phase. A steering committee, which will include representatives from natural gas utilities, industrial users, suppliers and the state of Alaska, will guide the project and review the results prior to publication.
“They will make sure we look at all the options that might be viable,” Thomas said.
That committee is scheduled to meet for the first time in early September. A final draft report is scheduled for the steering committee on Feb. 27, 2004, with a final report to be released one month after receipt of review comments and recommendations.
Primary users and marketers of Cook Inlet natural gas include Enstar; Anchorage Municipal Light & Power; Chugach Electric; ConocoPhillips, which operates a LNG plant in Kenai, and Agrium, which operates an ammonia-urea plant at Nikiski.
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