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Investment Needed to Tap Cook Inlet Gas, Says Study

Alaska's Cook Inlet basin is capable "given sufficient continued investments" of supplying the region's gas needs until 2018-2020 at a price below that of supply alternatives being considered, according to a new study.

"However, failure to make appropriate investments in lockstep with demand requirements will necessitate alternative sources of natural gas to be made available sooner. Therefore, transition to alternative sources of natural gas may begin to occur before the 2018-2020 timeframe as part of a comprehensive supply and risk management plan," said the study, which was conducted mainly by the state's Department of Natural Resources' (DNR) Division of Oil and Gas in cooperation with the Alaska Gasline Development Authority and consulting firms Ryder-Scott and SolstenXP.

Utilities in Alaska's Southcentral region are pursuing plans to import liquefied natural gas in order to head off a projected gas supply shortfall that could occur as soon as 2014 and grow significantly in the following years (see Daily GPI, June 28). However, a recent report by the U.S. Geological Survey claims that the Cook Inlet region has significantly more gas than was thought 16 years ago when the last assessment was done (see Daily GPI, June 30).

The research conducted by DNR used a "bottom-up approach to investigate the investment requirements, geologic and engineering uncertainty around the various targeted reserves" in the Cook Inlet.

While the Southcentral gas market has not been as commercially active as the Lower 48, producers there have fulfilled all their contractual requirements and are expected to do so in the future, the DNR report said. The basinwide economic analysis based on internal rate of return and net present value parameters suggests that natural gas from the Cook Inlet basin could be available to meet intermediate-term needs.

The research also found that gas storage will "play an increasingly important role in optimizing and managing deliverability and economics of the gas supply for Southcentral Alaska." This will take the form of seasonal storage, allowing production from the summer months to supply winter needs, the report said.

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