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AIDEA evaluating Interior energy options Board approves funding to investigate alternatives to North Slope LNG plant for delivering natural gas to Fairbanks and Interior Alan Bailey Petroleum News
Following the demise of a project targeting the construction of a North Slope liquefied natural gas plant for the supply of gas to Fairbanks, on Jan. 14 the board of AIDEA, the Alaska Industrial Development and Export Authority, approved the expenditure of $700,000 on an evaluation of alternative ways of delivering affordable gas to Fairbanks and the Alaska Interior. Gene Therriault, energy policy and outreach director for the Alaska Energy Authority, told the board that the assessment would likely take around two months to complete.
The new initiative comes in association with the Interior Energy Project, a project aimed at alleviating the high cost of energy for residents in the Fairbanks region by delivering affordable gas to the region.
Doomed LNG plan About a year ago AIDEA commissioned engineering firm MWH to prepare a plan and cost estimate for achieving the Interior Energy Project objectives by building an LNG plant on the Slope, with the intention of delivering LNG to Fairbanks by truck along the Haul Road from the Slope. Fairbanks electric utility Golden Valley Electric Association would have used much of the gas for power generation, with Fairbanks gas utilities Fairbanks Natural Gas and Interior Gas Utility storing and gasifying LNG, before distributing the gas to Fairbanks residents for the heating of buildings.
But during an AIDEA board meeting on Dec. 16 it became clear that the projected cost of gas for Fairbanks residents under the LNG supply arrangements would be higher than had been hoped, thus creating a high risk that residents would not convert to the use of gas for space heating. The falling price of fuel oil, an alternative energy source for heating buildings, compounded the risks and uncertainties associated with potential Fairbanks gas demand.
In early January AIDEA cancelled a concession agreement with MWH, thus putting an end to the LNG plant proposal.
During the Jan. 14 board meeting, Mark Davis, AIDEA chief infrastructure development officer, said that the shifting of the gas demand risk to the Fairbanks utilities, coupled with the drop in fuel oil costs, had proved problematic for the LNG project.
Take a new look Therriault told the board that the time had come “to hit the refresh button” and take a new look at ideas for supplying the communities with affordable energy. The Alaska Energy Authority has been working with AIDEA, in particular helping figure out how best to design the Fairbanks gas distribution network and assessing the sensitivity of Fairbanks gas demand to gas prices. A key factor in that demand is the cost to a resident of converting an existing oil-based heating system to a gas-fired system - depending on the nature of the existing system that cost might run anywhere from $2,000 to $11,000 Therriault said.
Therriault said that over the course of 2014, people had gained a better understanding of the cost of sourcing gas from the North Slope. At the same time, the gas supply situation to the south, in the Cook Inlet region, has changed - during the original planning for the Interior Energy Project a pending gas supply crisis in Cook Inlet had caused people to consider importing gas. But while that crisis has been averted, with new Cook Inlet gas supplies coming on line, the supply situation has not reverted to that of 1960s and 1970s, when the region was awash with gas. There is still some uncertainty about the levels of future Cook Inlet gas supplies and future gas pricing, Therriault said.
Work with stakeholders In Fairbanks, last year’s efforts on the North Slope LNG proposal had resulted in the three Fairbanks utilities forming something of an alliance, working together to find common solutions for ensuring gas supplies, despite retaining different perspectives on the gas supply situation, Therriault said.
At this point the proposal is to work with the three utilities and other stakeholders in the local community, to take another look at different energy supply concepts, he said. This process should not take very long, Therriault said.
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