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December decision for Fairbanks gas AIDEA’s Interior Energy Project is negotiating with five companies over a range of proposals for supplying LNG to the Alaska city ALAN BAILEY Petroleum News
The Interior Energy Project, a project to bring affordable energy to Fairbanks and the surrounding Alaska Interior, anticipates an early December date for a recommendation for a partner for the delivery of natural gas to Fairbanks, members of the project team told the board of the Alaska Industrial Development and Export Authority on Sept. 24. That would allow time for final negotiations between AIDEA, the Fairbanks utilities and the selected partner ahead of an AIDEA board meeting around Dec. 17, at which time the board would decide whether to approve the partner selection.
In early June, the Interior Energy Project issued a request for proposal for gas supply options, potentially including the production of liquefied natural gas on the North Slope or in the Cook Inlet region, and the transportation of the LNG to Fairbanks. As reported in the Sept. 13 issue of Petroleum News, at the end of August the AIDEA team selected a shortlist of five companies, some of which had proposed more than one supply option, for further evaluation.
The five finalists are Harvest Alaska LLC, an affiliate of Hilcorp Alaska LLC; Phoenix Clean Fuels LLC; Salix Inc.; Spectrum LNG LLC; and WesPac Midstream LLC. All of the proposals involve the production of liquefied natural gas for use in Fairbanks, with two companies proposing an LNG plant on the North Slope and three companies proposing LNG from the Cook Inlet. However, WesPac has also suggested the possibility of importing cheap LNG from Canada.
Best and final offers Following negotiations involving the finalists, AIDEA and the Fairbanks utilities, the Interior Energy Project team expects each finalist to submit a best and final offer for gas supply arrangements by around Oct. 16. At that point AIDEA anticipates the finalists presenting their offers in a public meeting in Fairbanks, with AIDEA soliciting comments from the public on the proposals, Nick Szymoniak, AIDEA’s energy infrastructure development officer, told the AIDEA board. An evaluation team will then assess the offers before selecting a single option, in preparation for the early December recommendation to the AIDEA board. And during that early December board meeting the selected partner for the gas supply arrangements will appear before the board, for a review of the selected proposal, Szymoniak said.
The board will then have a couple of weeks until its Dec. 17 meeting to mull over the proposal and to seek any further information it needs before making a decision on whether to accept the recommendation.
The project has also received responses to a request for information from Cook Inlet gas producers for possible Cook Inlet gas supplies for Fairbanks. The project team has initiated commercial discussions over potential supply arrangements, should the selected proposal for the delivery of gas to Fairbanks require a Cook Inlet gas supply, Robert Shefchik, Interior Energy Project team leader, told the AIDEA board. The team is also verifying the availability of a North Slope gas supply from BP, should a North Slope LNG supply prove to be the recommended route forward, he said.
Transportation options Although it may prove advantageous to ship LNG from the Cook Inlet to Fairbanks using the Alaska Railroad, the railroad does not yet have U.S. Department of Transportation approval for the carriage of LNG in Alaska, Shefchik said. Meanwhile, until that permission is obtained, all Cook Inlet supply options have to assume road transportation using a trucking operation, he said. A prototype 13,500-gallon capacity LNG truck is scheduled for delivery to Alaska on Oct. 19 for test operation on the highways where trucking may be required, Shefchik said.
A major build out of the gas distribution pipeline network in Fairbanks has been proceeding during the summer, in anticipation of an expanded gas supply for the city. And planning is in progress for LNG storage facilities in the city. Between them, the two Fairbanks gas utilities, Fairbanks Natural Gas and the Interior Gas Utility, have so far laid nearly 100 miles of pipeline, Shefchik said.
Pentex acquisition AIDEA is also in the process of purchasing Pentex Alaska Natural Gas Co., the owner of Fairbanks Natural Gas. The Pentex purchase is scheduled for completion in mid-October. Through its ownership of Fairbanks Natural Gas, AIDEA expects to reduce the cost of gas delivery in Fairbanks while also being in a position to merge the two existing gas utilities in the city. Ultimately, AIDEA would spin off the consolidated utility to some third party organization.
As part of its purchase of Pentex, AIDEA will acquire a small liquefied natural gas plant that Pentex owns near Point MacKenzie on the Cook Inlet. The state attorney general has prohibited the subsequent sale of the plant, as originally intended, to Harvest Alaska. However, the Pentex purchase is proceeding as planned, AIDEA spokesman Karsten Rodvik told Petroleum News on Sept. 25.
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