NIKISKI, Alaska—
ConocoPhillips and Marathon are trying to get an extension on the permit that allows them to export natural gas overseas. They argue that without it, customers here in south central Alaska would run into serious problems come winter.Cook Inlet is Alaska's other hub of oil and gas activity. Just a few dozen miles from Anchorage is a basin that started producing more than half a century before anyone tapped the North Slope.
Producers came for oil and stayed the natural gas around 42 years ago.
The ConocoPhillips liquefied natural gas project in Nikiski is the only plant in the United States which turns gas into liquid for export overseas.
The liquid natural gas, called LNG, is a super-concentrated fuel, 600 times smaller in size than its original gas state and since the liquid does not burn, is non-corrosive, non-explosive and non-toxic, it's easy to ship.
A tanker fills up and leaves from the Nikiski plant every three to four weeks, bound for Tokyo, Japan.
“Basically, once they receive the LNG, they store it and then they vaporize it and take it into their market there for home heating and electricity generation,” said Dan Clark, ConocoPhillips.
Asia could use Alaska's gas, but so could Alaskans who want assurance their local supply is not all going overseas. That's where the federal government comes in.
The government has the power to issue or deny Conoco's export permit, which expires in March. The company is seeking an extension which would keep the plant operating at its current level until 2013.
“We have significant support. There were resolutions from both houses of the State Legislature in support of it,” said Clark.
Cook Inlet gas basins are declining in production and the LNG plant is only at half-capacity, so it's a careful balance between Alaska and Japan.
“There's currently significant excess gas over the course of a year and that's what allows this gas to be exported to Japan,” Clark said.
ConocoPhillips says without the plant, the lowered demand would mean some Cook Inlet wells would have to be shut-in and might not restart to full-capacity when needed during cold months.
For now, the company says recent gas supply contracts ensure there will be enough gas for south central customers over the next few years.
A decision on the export permit could come any day now as federal regulators try to decide if what's best for Alaska is best for the world.
Some state lawmakers and Gov. Sean Parnell filed comments with the Federal Department of Energy saying that they support continued exports, but want assurance, in writing, that ConocoPhillips will meet local needs.
The company says recently signed contracts should clear up any concern.
More about conditions of the export permit when the Department of Energy makes its final decision.
The Nikiski plant is more than 40-years-old and, while it has had upgrades along the way, it would need substantial renovation if it were to continue another 40 years.
What ultimately will make the decision is if producers, like ConocoPhillips, continue to invest in the aging fields of Cook Inlet looking for new deposits or developing ways to extract gas that is more difficult to reach.
Contact Ted Land at tland@ktuu.com
