Conoco, Marathon seek renewal of LNG export license in Alaska

Houston Chronicle ^ | 4/9/10 | Tom Fowler

[thackney]

license in Alaska ConocoPhillips and Marathon Oil announced yesterday that they will apply to renew their liquefied natural gas export permit for the Nikiski, Alaska, plant.

The companies jointly own the Nikiski LNG plant on Alaska's Kenai Peninsula -- ConocoPhillips owns 70 percent and Marathon 30 percent, the Alaska Dispatch said.

The current federal export license expires in March 2011 and allows for about 99 billion cubic feet of exports. To date the companies have only shipped a quarter of that total. The new proposal will extend the time they have to export the 99 billion cubic feet by two years, the Anchorage Daily News said.

The Department of Energy can issue an export only if local demand is met, the Dispatch said. Gas production in the area has declined recently creating a local supply crunch, according to the Daily News. Yet, without exports, the Southcentral area won't have ensured supply either.

[thackney]

LNG permit decision could buy SC some time
http://www.alaskadispatch.com/blogs/political-animal/4818-lng-permit-decision-could-buy-sc-some-time
by Rena Delbridge
Apr 8, 2010

Southcentral residents may have gained two more years of relief from predicted natural gas shortages with the news today that ConocoPhillips and Marathon Oil Co. will seek renewal of a federal permit allowing liquefied natural gas exports from Nikiski.

The exports are a buffer against huge seasonal demand swings in Southcentral business and residential natural gas use. Producers can’t dial well production up and down without facing real risks of damaging those wells. With exports, they’ve got a buyer for lots of gas in the summer, and the chance to taper off export in winter to meet local demand.

In related news, Chugach Electric is working on a new two-year supply contract with Marathon, and Enstar is expected to release similar news soon. The utilities are a major market for gas producers.

The Conoco/Marathon renewal goes before the U.S. Department of Energy. The Alaska permit is the only one in the nation, and authorized under interesting conditions. The feds may issue an export license only if local demand is also met. But slumping production and a small local market has officials warning of shortages during peak demand. Yet here’s the twist - without exports, Southcentral may not have enough production remaining to meet local demand.

The companies aren’t asking DOE for the chance to export more gas. The last two-year extension allowed export of 99 billion cubic feet of gas over two years, but only 27.9 bcf has been shipped to Japan. The new permit would allow the companies to draw out the remaining 71 bcf over two more years, said Dan Clarke, Conoco’s Cook Inlet Manager.

Lots of people have been waiting to hear what Conoco and Marathon decided on the plant. Talk was they may shutter it, or even sell.

Vice-president of Commercial Assets Erec Isaacson said Conoco put off the decision to see how close deliverability came during the winter. Supplies covered demand, although the winter was mild. That gave Conoco some confidence in the whole system, he said.

Also playing into the decision was an announcement by Enstar that it will take over a gas storage project initiated by a TransCanada subsidiary (read about that here). Isaacson said that leaves options open for 2013, when the export facility could be turned into an import terminal; remodeled as a gas storage facility; or held online pending fresh supplies of natural gas via a pipeline from the North Slope.

Last time the companies sought renewal, the state objected, wanting to assure that Alaska demand was met before allowing exports to Japan. Those objections dragged the renewal out to 18 months, but netted a deal by which Conoco and Marathon would drill some new wells and agreed to hold back exports at peak Southcentral demand times.

The state may be fully onboard this time. Asked about state support, Gov. Sean Parnells’ spokeswoman Sharon Leighow emailed this statement:

“We are pleased that ConocoPhillips and Marathon are seeking a two-year extension to export their approved existing volumes of export gas. We stand ready to work with the companies and review their application. This LNG facility provides the backstop for gas supplies during very cold winter days.”

Without objections, Conoco was confident the feds will renew the permit before it expires March 31, 2011.

U.S. Rep. Don Young sent a letter to Energy Secretary Steven Chu in mid-March, stressing the value of Alaska’s exports in supporting production for local consumption. Read that letter here . That was during the height of an in-state natural gas pipeline push by state lawmakers and former state leaders, which continues with a couple bills still in play.

Sen. Lesil McGuire, R-Anchorage, sent out this press release on Thursday lauding the companies’ decision to renew the permit, saying continued exports through 2013 could bring deliverability gaps anticipated as early as next winter, while keeping a critical end-user for an instate gas pipeline in the game.

ConocoPhillips owns 70 percent of the Nikiski plant, with Marathon Oil Co. a 30 percent partner. Authorized to export LNG since 1967, the plant ships LNG to Japan. Historically exports were made on two tankers, but that dropped to one in 2009. In 2008, ConocoPhillips sold 27 billion cubic feet of natural gas to Japan customers, spokeswoman Natalie Lowman said.

[ASOC]

“when the export facility could be turned into an import terminal”

Am I alone to see how (deleted)ly crazy a statement that is? Alaska is killing itself, the state has not/will not issue or is dragging it’s feet on issues drilling permits for more gas.

I purchased a Monitor heater for backup heat in the house for when, not if, the natural gas system collapes. 50 gallons of heating oil will last about a month, maybe more - and at least I’ll have heat.

Thanks for posting - many folks will not believe me when I talk of gas shortages....