IGU approves Canadian LNG supply contract

Alan Bailey

Petroleum News

During its Jan. 5 meeting the board of the Interior Gas Utility approved the signing of a liquefied natural gas supply agreement with Vancouver, British Columbia, LNG producer Cryopeak LNG Solutions Corp.

IGU, which supplies natural gas in the Fairbanks region, obtains its gas in the form of LNG from the Titan LNG plant that it owns on Cook Inlet near Point Mackenzie. The purpose of the new contract with Cryopeak is to have access to an alternative LNG source, should there be an emergency stoppage at the Titan plant, or should there be some price advantage in obtaining LNG from Canada, Dan Britton, IGU general manager, told the IGU board.

The agreement provides a contractual framework for a future LNG supply but does not commit to any specific volumes of Canadian LNG that IGU may purchase. Nor does it include any pricing commitment, Britton said. The idea is to be able to quickly establish an LNG supply from Canada, based on a negotiated price for an LNG order, if the LNG is sought by IGU and is available. Currently, it is cheaper to obtain LNG from the Titan plant than from Canada, Britton said.

In the event of purchasing LNG from Cryopeak, the LNG could be transported to Alaska from Canada by barge using Cryopeak LNG trailers - this procedure was tested in 2020, Britton said.

In anticipation of the increased use of natural gas for heating buildings in Fairbanks, IGU has completed and put into operation a new 5.25 million gallon LNG storage tank in central Fairbanks. The utility is also constructing new storage facilities in North Pole, in anticipation of serving new customers there.

The utility has been planning to expand the Titan LNG plant in support of potential increased Fairbanks gas demand. However, a decision on whether to proceed with that expansion has been placed on hold, given uncertainty over future gas demand because of the fall in the price of fuel oil as a consequence of the COVID-19 pandemic.

IGU’s efforts form part of the Alaska Industrial Development and Export Authority’s Interior Energy Project, a project aimed at bringing increased supplies of affordable natural gas to the Fairbanks region. The desire to increase gas usage in Fairbanks is in part motivated by the need to reduce winter air pollution in the region.

- ALAN BAILEY