This spring will see the end of shipments of liquefied natural gas (LNG) from Kenai, AK, to Japan, at least for a while. ConocoPhillips, 70% owner and operator of the Kenai LNG terminal, is mothballing the facility after more than 40 years of operation due to poor conditions in the Asian LNG market.

While the future of the facility is unclear, it could one day be converted to import LNG, allowed ConocoPhillips spokeswoman Natalie Lowman. "The actual purpose of the mothballing of the plant is to preserve it for any future options that might come up," she told NGI. "That might be exports or imports or any other configuration."

Some have called for importing LNG to Alaska in order to make up for gas supply shortages in the state's Southcentral region (see Daily GPI, Dec. 28, 2010).

Since it shipped its first cargo to Japan in October 1969, the plant has sent all of its cargoes to Japan, save for one, Lowman said. The plant's current long-term contract ends in March. Exports are to cease in April-May.

At its peak the Kenai terminal, in which Marathon Oil has a 30% stake, was exporting 63-68 Bcf/year with more than 30 tanker calls per year. However last year exports were about 30 Bcf, Lowman said.

"We've basically said we couldn't secure the necessary sales and supply agreements that would allow the plant to operate in a commercially viable manner," she said. However, the plant recently received an extension of its export license to 2013 from the federal government.

In theory at least, gas that isn't exported as LNG will be available to serve consumers, businesses and utilities in Southcentral Alaska, but Lowman said she couldn't say how much additional gas that would amount to. "We are committed to honoring our local gas contracts, and we have those in addition to what we have done with our LNG exports," she said.

ConocoPhillips said it intends to continue producing gas at its two Cook Inlet fields, Tyonek and Beluga, to supply the Southcentral market.

The closure of the facility will affect about 60 workers, half of them ConocoPhillips employees and the remainder employees of contractors to the facility.

Sen. Lisa Murkowski (R-Alaska) lamented the job losses. "The closure of the LNG plant will leave a huge hole in Kenai's economy, and my first thought is for the employees and their families, many of whom are wondering what they're going to do now," she said. "This announcement highlights the urgent need we face to find a way to commercialize our North Slope gas reserves and create the kind of economic growth that will keep families in Alaska."

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