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Study: Southcentral Alaska Gas Supply Not So Grim

Southcentral Alaska and the railbelt area have enough gas reserves to meet their needs for a decade or more, according to a new study of gas reserves in the Cook Inlet basin released recently by the Alaska Department of Natural Resources (DNR). The study suggests that recently voiced fears of a regional gas shortage are premature; however, gas and electric utilities in the region still have had difficulty securing supplies.

DNR Commissioner Tom Irwin authorized the study through the department's Division of Oil and Gas last spring due to public questions about gas shortages and concerns over possible energy blackouts this winter.

"Consumers who rely on Cook Inlet natural gas should be aware that although reserves are winding down, we still have about 20% of the original capacity left," said Irwin. "The most accessible gas has been produced, and while the basin is not in imminent danger of running out, the remaining gas may carry an increased cost."

The study represents a effort to evaluate available gas reserves from a geological perspective. Engineering analysis of well data and geological and geophysical review of well logs, production and seismic data provide the basis for this study. Based on this information, energy experts within DNR analyzed all 28 producing gas fields within the Cook Inlet basin.

"Essentially, we looked at the amount of gas produced from these wells, the amount of reserves and other factors related to the mechanics of the wells and the composition of the reservoirs and the basin to make our assessment," said Kevin Banks, director of the Division of Oil and Gas. "By our best estimation there is approximately 1,142 Bcf of probable gas reserves remaining in these developed reservoirs. These reserves estimates don't include the potential from the exploration and production of as yet undiscovered resources."

The study looked closely at four gas fields in particular: Beluga River, North Cook Inlet, Ninilchik and the McArthur River Grayling gas sands. Total proved, developed, producing reserves remaining from all existing Cook Inlet fields is estimated at 863 Bcf, plus another 279 Bcf recoverable with increasing investment. However, Beluga River, North Cook Inlet, Ninilchik and the McArthur River Grayling gas sands could yield an additional 353 Bcf in high-confidence pay intervals and another 643 Bcf in a 50%-risked case from lower-confidence pay intervals, the study said.

"These geologically identified volumes of known and potential nonproducing gas represent a significant energy resource, which if developed, have the potential to supply local demand well into the next decade," the study said. "This forecast assumes that exports of gas from the basin will be curtailed during demand shortfalls and cease altogether at the closure date of the current [LNG] export license (March 31, 2011) [see NGI, June 9, 2008]. It also assumes that no new significant demand will be developed until additional resources are discovered in new fields."

The study is limited to evaluating available reserves. It does not attempt to analyze the economics for continued development within the basin.

Last year the region's Chugach Electric Association and Enstar Natural Gas were among utilities that presented plans to an Alaska House energy committee to reduce their gas consumption in times of shortage (see NGI, Sept. 7, 2009). Last spring Chugach struck a seven-year gas supply contract with ConocoPhillips to head off a significant supply shortfall that had been expected by the utility (see NGI, May 18, 2009).

A report released last year by the Interior Issues Council: In-State Natural Gas Distribution Task Force of the Fairbanks Economic Development Corp. weighed several options for delivering more gas to the Southcentral region. The report found fault with each of the in-state gas distribution proposals reviewed (see NGI, Feb. 9, 2009).

"Without increased investment the reserve base for the basin will continue to decline," said Irwin. "Investments in storage development, reserves replacement and pipeline infrastructure will create additional pressure on future energy prices."

The study concedes that concern over gas supply in the region has been running high. "Over the past year there has been widespread concern over whether the existing system of natural gas production and delivery in the Cook Inlet basin can continue to meet the energy demands of Southcentral Alaska," it said. "Of most immediate concern is whether there may soon be shortfalls during brief spikes in peak gas demand brought about by severe winter weather."

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