|
REI plugs away on Cook Inlet LNG plant Low LNG prices in Japan, obtaining Cook Inlet natural gas at reasonable price, biggest challenges; looking for investment partners TIM BRADNER For Petroleum News
The economic headwinds are strong, but REI Alaska, the Japanese company hoping to develop a small liquefied natural gas, or LNG, project on Cook Inlet, is still plugging away.
The company is taking the long view. “LNG prices are low but REI looks at this as a 20-year project,” says Mary Ann Pease, REI’s Alaska vice president.
“Alaska and Japan have a 45-year history in trading LNG, and our project is about maintaining relationships and building partnerships,” she said.
REI continues to do technical work to advance its project, most recently geotechnical soils work at the proposed site of a medium-sized LNG plant adjacent to Port MacKenzie in the Matanuska-Susitna Borough, Pease said.
REI would be capable of exporting 1 million tons a year of LNG with an expansion capability built into its design.
The company’s plant site is on leases adjacent to the borough-owned port where REI has options. Golder and Associates of Anchorage is doing the work, which is to ensure that soils are strong enough to support heavy LNG plant equipment and tanks, Pease said. If the project proceeds REI will need about 128 acres in total.
The Japanese company is also doing an assessment of the borough’s current dock at Port MacKenzie to see if it can provide support for the LNG project.
Continued interest Municipal governments, utilities and companies in Japan continue to be interested in REI’s project. REI recently hosted a high-level delegation of Kyoto officials and industry leaders, and on Aug. 17 top officials of Mitsubishi Gas Chemicals will arrive in Alaska, for a visit to REI’s Mat-Su port site and Agrium Corp.’s fertilizer plant at Nikiski, which is closed but which Agrium is considering restarting.
Mitsubishi Gas Chemicals Chairman Kazuo Sakai is heading the visiting delegation, which will include three other top company officials.
On the commercial side, Pease said REI is continuing to look for North American investment partners and for “offtake” partners, or customers, in Japan. Mitsubishi Gas Chemicals itself has been engaged with REI in various studies over several years.
Prices, supply challenges The two biggest challenges for REI at this point are the low LNG prices in Japan and obtaining natural gas in Cook Inlet at a price the company can afford, Pease said. Energy prices are cyclical so at some point LNG prices will rise.
Gas prices in Southcentral Alaska have meanwhile been at $7 and $8 per thousand cubic feet in recent years but are trending downward in recently signed gas contracts, Pease said.
REI was formed by a group of Japanese municipal governments, utilities and medium-sized companies to develop an LNG project that could provide a supply of liquefied gas at an assured price.
The Japanese entities wanted to own the project, or most of it, to provide LNG supply and price security instead of having to buy LNG from others, including the major North Slope producers who are part of the Alaska LNG Project.
Another motivation for REI is that a smaller LNG project can be built faster than a large one like that proposed by Alaska LNG. The company proposes to build its plant as modules which are based on currently operating designs.
REI’s most recent planning incorporated an Air Products and Chemicals Inc. liquefaction process for its plant.
Once REI is established and has a foothold in the Japan market it can be expanded if North Slope gas becomes available, Pease said.
| 