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Alaska Utilities Seeking LNG Supply Solution

Between Alaska's North Slope, where there is a lot of gas, and the Lower 48, where there also is a lot of gas, lies Alaska's Southcentral region, where there is not so much. The region's utilities comprise a group that believes the time is now to begin developing liquefied natural gas (LNG) import capability to head off a 2 Bcf supply shortfall projected to occur in 2014 and grow in the following years.

Jim Posey, general manager of Municipal Light & Power (ML&P), which is one of the Southcentral utilities that plans to seek LNG supply, has been waiting on North Slope gas for a long time, since before he even lived in Alaska. "I started working in Dallas for Arco in 1975 expecting the gas to be going off the Slope in 1987-1989. After 35 years of waiting it's a long time," he told NGI.

While it might come someday -- either through a bullet pipeline or on a spur off a Lower 48 project -- there's no way North Slope gas will make it to Southcentral in time to meet the utilities' near-term needs, they believe. In the meantime, ML&P, Enstar Natural Gas Co. and others are relying on supply from the Cook Inlet, which is in decline (see Daily GPI, Dec. 28, 2010).

According to a recent presentation given by Daniel Helmick, ML&P's manager of regulatory affairs, to the Regulatory Commission of Alaska (RCA), the utilities' projected annual supply shortfall in the Cook Inlet climbs rapidly after 2014. In 2015 it is projected to be 10 Bcf and double the next year, growing to 64 Bcf in 2022 if new supply is not secured.

Posey said it's not as though the utilities haven't been trying to gain access to North Slope gas. "The problem is what you do between now and 2014 and 2015...[LNG] will supplement what we're using in order to make sure that we don't have any drops."

Future sourcing of LNG is still up in the air, but the region needs dry gas that does not require processing, Posey said. "It has to match basically the gas that's coming out of the [Cook] Inlet...That's the heating value that works best for our equipment; otherwise you've got to go back and do some things. We have old equipment and new equipment; old equipment doesn't like changes."

An onshore regasification facility is probably what would be needed to allow for importation of LNG during the winter, Posey said.

In order to import LNG the utilities will need approvals from the RCA and their respective boards, as well as the Federal Energy Regulatory Commission. "The FERC piece is a little bit different because we don't usually deal with FERC. But the people we deal with deal with FERC all the time," Posey said.

"I think by this fall we'll have things pretty nailed down on what we're going to do and who we're going to do it with."

Until recently Alaska was exporting LNG to Japan from a liquefaction terminal at Kenai, but that facility was recently mothballed (see Daily GPI, Feb. 11). The prospects for a new liquefaction facility that would serve Asian and other markets has been talked about in the context of a pipeline that would carry gas to Lower 48 markets (see Daily GPI, Jan. 27). However, hopes for a Lower 48 gasline recently dimmed when one of two proposed projects, Denali: The Alaska Gas Pipeline, abandoned its efforts (see Daily GPI, May 18). This was shortly after the federal government's coordinator of the Alaska gasline project cast doubt on the viability of a project in the current market (see Daily GPI, April 21).

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