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Gas delivery to Enstar driving Kenai Kachemak Pipeline schedule
Kristen Nelson
Applications are being turned in and a June date has been set to order pipe for the Kenai-Kachemak Pipeline, with the schedule geared to meet a Jan. 1, 2004, date for Unocal to begin delivering natural gas to Enstar.
Kenai Kachemak Pipeline LLC, owned by subsidiaries of Union Oil Company of California and Marathon Oil Co., started its open season — asking for expressions of interest in contracting for pipeline space — late last year.
The company told the Regulatory Commission of Alaska Jan. 16 that it expects to file applications with the RCA for the proposed Kenai to Anchor Point pipeline the week of Feb. 4. Applications have already been filed with the State Pipeline Coordinator for rights of way and with the Division of Governmental Coordination because the project is in the coastal zone.
Non-binding preliminary expressions of interest in shipping natural gas on the pipeline are due Jan. 25 and will be reflected in the RCA filing, Kenai Kachemak said.
State and private oil and gas leaseholders on the peninsula were notified by mail of the open season for the pipeline, as were potential gas purchasers, and legal notices were published, the company said. The open season for expressions of interest included a meeting for those interested in shipping — but no one came. So far more interest has been expressed by state agencies than by other potential gas shippers, the company said.
Unocal, Marathon will ship Kenai Kachemak owners Unocal and Marathon are expected to do more drilling in new fields this winter and spring, the company said. Service and rate refinement will also be done and firm commitments from shippers — Unocal, Marathon and any others who want to secure space in the line — are due June 3, at which point pipe will be ordered.
Kenai Kachemak wants to have its permits in place by Jan. 1, 2003, and to start construction Feb. 1, 2003, with a winter 2003 construction season. There will only be light construction in the summer to minimize disruptions to summer travel. The pipeline would be finished up in the fall, with Nov. 1 the target date for completion.
Gas to Kenai hub The pipeline will be an open access line which will transport gas for shippers, primarily to the Kenai gas hub for connection to the Kenai Nikiski Pipeline Co. and the Alaska Pipeline Co.
The primary purpose of the pipeline, Kenai-Kachemak said, is to transport gas from new fields developed on the southern part of the Kenai Peninsula — Kasilof, Ninilchik, South Ninilchik, Deep Creek, Anchor Point — to the existing pipeline system serving the northern part of the peninsula, Anchorage, and the Matanuska and Susitna valleys.
A secondary purpose is to move gas to the southern Kenai Peninsular, where either Enstar or Homer Electric Association could be a distributor. Kenai-Kachemak said that while the sequence of pipeline construction will be determined through the open season, it expects the Ninilchik unit and the South Ninilchik and Deep Creek fields will be hooked up first.
Pipeline a contract carrier The Kenai Kachemak pipeline will be a contract carrier: Shippers of gas will contract for a specific amount of gas to be shipped each day. This contracted, or firm service, takes priority. If there is capacity left over, other gas can be shipped on an interruptible basis. This is different than the trans-Alaska oil pipeline, which is a common carrier and must accept all oil offered for shipment, Kenai Kachemak told the RCA.
If more oil is offered than a common carrier pipeline can ship, each shipper’s volume is reduced by the same percentage — prorated — so that a portion of each shipper’s oil is moved.
A common carrier concept wouldn’t work for gas, the company said, because there is no storage and because purchasers have to be able to count on receiving gas when they need it — not when there is room in the pipeline to ship it.
Two filings Kenai Kachemak said there is an unresolved issue: whether to file with the RCA under pipeline statutes or under public utilities statutes. The state’s pipeline statute may not allow for a contract carrier, the company said, while under the state’s public utility statutes the RCA has the authority to require a project to expand — and also to require it to provide other public utility services, such as gas distribution, a business Kenai Kachemak does not want to get into.
If these issues cannot be resolved quickly, Kenai Kachemak said a legislative fix may be required and it will probably file under both statutes.
No quality bank The commission had a number of questions.
Kenai Kachemak said this pipeline would not require a quality bank — the accounting device used on the trans-Alaska pipeline because of different quality oil.
If additional shippers want to come in after space is contracted this June, Kenai Kachemak said it will be first-come first-served if there was spare capacity which can be contracted. If no spare capacity existed, the company would determine the cost of adding compression or additional capacity and the new shipper could then decide if it wanted to pay for additions to the line. New shippers could also sub-contract space from existing shippers.
No excess capacity would be built into the line, but because gas production begins slowly and then peaks before declining, there would be excess capacity before fields reach full production and after they go into decline.
The proposed life of the line is 15 years, based on estimates of the life of the gas fields. While final pipeline sizing decisions will not be made until shipping contracts are in place, Kenai Kachemak said working estimates are a 16 inch line for Zone A (from the Ninilchik unit to the Kenai gas hub) and a 12 inch line for Zone B (from the Anchor Point prospect to the Ninilchik unit). For spur lines to other prospects the lines will probably be six to eight inches.
The entire line will be some 50 miles long and the company said seven to eight valves would be installed during construction, valves which could be used as connections to distribution systems.
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