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ConocoPhillips applies to restart Kenai LNG plant for gas exports
ConocoPhillips has applied to the U.S. Department of Energy for a license to restart the export of liquefied natural gas, or LNG, from the company’s mothballed LNG plant at Nikiski on Alaska’s Kenai Peninsula. The license, if granted, would allow the export of up to 40 billion cubic feet of natural gas as LNG over a period of two years.
The company has not said who would buy the exported LNG or where the LNG would go.
Faced with tightening gas supplies from the Cook Inlet basin, ConocoPhillips shuttered the LNG plant early this year after using the plant to export gas to Japan for many decades, starting in 1969. The most recent Department of Energy license for LNG exports from Kenai expired in March.
However, a revival in the Cook Inlet gas industry thanks to companies new to the region, including Hilcorp Alaska, Buccaneer Alaska, Armstrong Cook Inlet, Nordaq Energy and Furie Operating Alaska, the decline in gas production has been stemmed until at least 2018. But, with Hilcorp, in particular, tying up much of the Southcentral Alaska utility market for a few years into the future, some other gas producers have expressed concerned about finding a market outlet for any new gas that they may find and develop.
Industrial anchor In fact, although it may appear counterintuitive to export gas from a region where local gas supplies have become tight, the Kenai LNG plant has in the past provided an anchor industrial outlet for gas development and production while also acting as a backstop for winter gas delivery, enabling the diversion of gas originally earmarked for export into the supply stream for utilities.
In September the State of Alaska requested ConocoPhillips to re-open the LNG plant, saying that companies operating in the Cook Inlet basin needed market opportunities as incentives for investment in new exploration in the basin. ConocoPhillips has now responded to that request.
And, in a Dec. 12 email, ConocoPhillips spokeswoman Natalie Lowman told Petroleum News that the company will support utility gas supplies as an overriding priority.
“ConocoPhillips Alaska remains committed to meeting its local gas supply contracts and putting local gas needs first,” Lowman said. “COPA affirms its commitment to divert its equity and third party gas from the Kenai LNG facility to local buyers during times of peak need.”
And Sen. Mark Begich expressed his support for ConocoPhillips’ decision.
“With all the Southcentral utilities having gas under contract through March 2018, this is a welcome boost to the Kenai Peninsula economy,” Begich said. “Even seasonal shipments of LNG will add jobs and create incentives for exploration and competition, helping to keep prices lower for Alaskans.”
—Alan Bailey
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