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Flint Hills permitting LNG project Flint Hills, GVEA project would truck 29.5 million cubic feet of LNG a day, 8-9.5 bcf a year, to Fairbanks for power generation Eric Lidji For Petroleum News
The race is on to truck liquefied natural gas supplies to Fairbanks.
Coming eight months after regulators gave a Fairbanks Natural Gas LLC affiliate the go ahead to start a North Slope LNG system, two Flint Hills Resources LLC affiliates have begun permitting a similar project to service an Interior refinery and electric cooperative.
Caribou North Slope LLC wants to build an LNG facility in the Prudhoe Bay unit, located along Spine Road between Pump Station 1 and Drill Site 6, and a corresponding LNG vaporization and storage facility in North Pole. Along with fellow Flint Hills subsidiary Koch Alaska Pipeline Co. LLC, Caribou would also build a half-mile above ground pipeline connecting the plant to existing Prudhoe Bay natural gas facilities.
The project includes a nine- to 12-acre pad to accommodate the LNG North Slope facility.
The system would deliver 29.5 million cubic feet per day, or 8 billion to 9.5 billion cubic feet per year, of LNG to the Interior over 20 years, the companies estimated in filings.
The system would also extract some 10,000 gallons of propane per day.
Without a pipeline connecting North Slope natural gas fields to markets in or out of the state, the companies plan to truck both fuels to the Interior. The current plan calls for using 13,000-gallon long-haul trucks, powered by natural gas. The system calls for having 20 full trucks heading south and 20 empty truck heading north at any given time.
The system would cost some $183.6 million to build — with $108.2 million going toward materials — and $3.65 million per year in operate and maintain. The companies plan to start building the system in early 2014 and bring it into operation by mid-2016.
The project would employ about 100 people during construction, between six and 10 during operations and between 40 and 50 truck drivers through a local contract.
The State Pipeline Coordinator’s Office is taking comments through Jan. 14. 2013.
Symbiotic relationship The project stems from a 2011 memorandum of understanding between Flint Hills Resources and Golden Valley Electric Association to secure an LNG supply to operate their North Pole facilities, and also to potentially sell to other customers in the region.
An LNG project would extend the mutually beneficial relationship the companies maintain at their neighboring facilities in North Pole, where the vaporization plant would be located. The Flint Hills refinery uses electricity produced by GVEA. The GVEA plant runs on naphtha produced by Flint Hills, but was designed to also operate on natural gas.
Flint Hills hopes a cheaper fuel supply would allow it to be more competitive, while the electric cooperative said “lower costs may result in lower rates to GVEA members.”
Third proposal this year The project is the third LNG facility proposed for the North Slope this year.
Earlier in the spring, the Regulatory Commission of Alaska gave the Fairbanks Natural Gas affiliate Polar LNG LLC a certificate to build a pipeline for its project. The Polar LNG system would also involve trucking LNG to Fairbanks. Fairbanks Natural Gas already operates a vaporization facility and a small distribution grid to its customers.
Fairbanks Natural Gas President Dan Britton said the project is “ready for construction.”
For Fairbanks Natural Gas, the system would be a way to leave the supply-constrained Cook Inlet market for a long-term, reliable supply from the North Slope. Without expanded supplies, the utility cannot expand its reach in the Interior heating market.
But Polar LNG would need big customers like Flint Hills and GVEA — two of the largest liquid fuels users in the Interior — to improve the economics of its system.
The two entities are currently in “active discussions” on ways to work together, most likely for the purposes of seeking state aid for construction, Britton said recently.
While those two projects have been in competition for more than a year, a third player recently stuck its toe into the market, to as-yet-unknown effect. In October, Spectrum Alaska LLC proposed a $30 million LNG plant, also to be located in the Prudhoe Bay unit. While designed to supply industrial customers across the North Slope, the company also said in filings it would “provide LNG for use in any market that chooses to convert.”
Alaska is currently home to two LNG operations: the Kenai LNG facility constructed in the late 1960s and recently discussed for potential warm shut-down or conversion, and the current Fairbanks Natural Gas facility at Point Mackenzie, built in the late 1990s.
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