Hawaii Gas, the island state's principal gas utility, has filed with the state regulatory commission to convert up to 30% of its synthetic natural gas (SNG) production at an Oahu-based plant to lower-cost liquefied natural gas (LNG) it plans to import from the North American mainland.

Earlier this year, the gas utility, which operates the Kapolei SNG plant to satisfy Hawaii's gas fuel needs, received an initial containerized LNG shipment from Newport Beach, CA-based Clean Energy Fuels Corp. (see Daily GPI, April 10). It was projected by the utility to be the start of regular shipments from the mainland, allowing Hawaii Gas to use the LNG as a backup for its SNG operations.

In the filing to the Hawaii Public Utilities Commission (PUC) in mid-October, Hawaii Gas said it has secured LNG supplies from sources in both the United States and Canada to be delivered in weekly containerized shipments. The LNG will be regasified and injected into the utility's existing pipeline infrastructure, a utility spokesperson said.

Separately on Tuesday, an analysis by RBN Energy LLC's Housley Carr predicted that Hawaii will be making a multi-year transition from an oil-based economy to one supported largely by LNG. That would include supplying the state’s electric utility, Hawaiian Electric. Currently, the SNG is produced from naphtha, a byproduct of the state’s two oil refineries.

If the latest application by Hawaii Gas is approved by the PUC, regular LNG deliveries to its Oahu distribution pipeline customers could start by late next year, the utility spokesperson said. Savings for its customers will total about $6.4 million annually due to the lower cost for the LNG, compared with SNG made from naphtha.

Citing fuel source diversity and enhanced reliability, Hawaii Gas CEO Alicia Moy said the utility's move to LNG is "a key step toward maximizing energy security during a time of energy transition in Hawaii."

Carr said Hawaii Gas estimates that 20,000 gal/d of LNG, or 1.64 MMcf/d, can displace 30% of the SNG now being produced, and he estimated that about 3.3 times a much -- 67,000 gal/d, or 5.5 MMcf/d -- is needed to displace all of the SNG. "That's equal to about 42,000 metric tons/year of LNG," he said.

If Hawaiian Electric follows through with its plans to switch most of its oil-fired power units to LNG-based gas by 2017-2018, the supply needs jump up considerably, hitting 86 MMcf/d or 626,000 metric tons/year in 2022, but these requirements would decline by about one-third by 2030 with the electric utility's ongoing shift to more renewable-based power supplies.

Carr noted that besides Clean Energy Fuels, Hawaii Gas has supply agreements for LNG from FortisBC in Canada. Both deals remain confidential, he said, but the Fortis deal reportedly is under a tariff already approved by the British Columbia Utilities Commission, since Fortis is a regulated utility. A revised deal with Clean Energy resulted from what Hawaii Gas has called "an arm's length contract negotiation."