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Alaska LNG Export License Extended Two Years

Liquefied natural gas (LNG) exports from Alaska's Kenai terminal may continue for two more years with the approval by the U.S. Department of Energy of an export license extension for ConocoPhillips and Marathon Oil Corp.

With the extension, which lasts from April 1, 2009 until March 31, 2011, the companies may export up to 98 Bcf. The terminal owners filed for the extension in January 2007 (see NGI, Jan. 22, 2007). The companies struck an agreement with the state a year later to secure its support of a license extension (see NGI, Jan. 7). The extension allows for exports to Japan and other countries on either side of the Pacific Rim.

The agreement with the state ensures that there will be adequate supplies of gas for local utilities, said Gov. Sarah Palin's office at the time. It also requires the owners to develop additional natural gas reserves in Cook Inlet and allow third parties the opportunity to monetize their gas production through the LNG plant. Marathon and ConocoPhillips have also agreed to sell Cook Inlet seismic and well data to third parties.

"In these times of economic uncertainty, this is great news for the state and its residents," Palin said Tuesday of the license extension. "This extension will secure a future for the LNG operation and is another step toward ensuring energy supplies and energy security for Alaska."

Also supporting the license is south-central Alaska local distribution company ENSTAR Natural Gas Co. as it will benefit from the ConocoPhillips and Marathon commitment to develop more gas supplies for the region (see NGI, April 28). The utility has been in talks with Agrium Inc., owner of an area fertilizer plant, about supporting a "bullet" gasline from the foothills of the Brooks Range to Cook Inlet, a spokesman told business leaders last month, as reported by the Associated Press. The 690-mile, 20-inch diameter bullet line would complement a larger North Slope-to-Alberta pipeline (see NGI, May 26) and could also extend the life of the Kenai LNG terminal, ENSTAR spokesman Curtis Thayer said.

According to the most recent statistics available from the U.S. Energy Information Administration (EIA), the United States exported to Japan an average of 3.14 Bcf of LNG per month over the period October 2007 through March 2008. Exports were 1.68 Bcf in October, 3.20 Bcf in November, 4.44 Bcf in December, 2.84 Bcf in January, 2.73 Bcf in February and 3.94 Bcf in March. The landed price for U.S. LNG received in Japan was $6.20/Mcf in October, $6.32/Mcf in November and $6.27/Mcf in December, according to the most recent figures available from EIA.

The Kenai LNG facility, located in Nikiski, is the only LNG export plant in North America. The companies have held a license to export LNG from the facility since 1967.

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