Bridging the gap: what's being done to supply the Railbelt with natural gas?

• Author: Resz, Heather A.
• Position: OIL & GAS

Imagine you're driving a rig north on the Dalton Highway, hundreds of miles from the nearest gas station, when the fuel light comes on. You're not sure when the light came on, but it's on and you need more gas--soon.

Now shift gears to Cook Inlet and its natural gas supply. Same thing.

Since around the 1960s, the economy of Southcentral Alaska has benefited enormously from Cook Inlet's abundant gas reserves. Back then Alaska was lucky', too, to have industrial partners placing big orders, which helped to offset the costs such as maintenance, operations and construction of the natural gas infrastructure.

But the inlet's proven gas fields are aging and the amount of gas they can deliver already nearly equals demand.

Joe Balash, a special assistant to the governor on energy and resource issues, said Southcentral would already be feeling the squeeze if the Agrium plant in Nikiski were still in operation.

The fields' known reserves are down to eight years of deliverable gas and no one is certain exactly where the region will get more natural gas to heat and light Alaska's homes and businesses when the Cook Inlet fields run out.

On the horizon, Alaskans can look forward to a future where a large diameter gas pipeline delivers North Slope gas to the Alberta hub for sale in North American markets, Balash said.

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TransCanada and Denali--The Alaska Gas Line Project are both working on plans for separate 1,700-mile super-sized pipelines to link to existing infrastructure in Canada and the Lower 48 by 2018. The natural gas pipeline is expected to deliver 4 billion cubic feet a day to Alberta.

"That's coming, but we have this period of time where there is a gap," Balash said. "How to bridge that gap, that's the question."

As things sit now, the inlet has eight years of proven natural gas reserves, but contracts to deliver gas between producers and utilities begin expiring in three years and the Regulatory Commission of Alaska hasn't approved a new Cook Inlet natural gas contract since 2002, he said.

Several contracts have been presented to the Regulatory Commission, but it has rejected the price structures in all of them as not in the public's best interest, said Tony Izzo, an Alaska energy consultant.

How SOON DOES THE RAILBELT NEED MORE GAS AND WHERE WILL IT COME FROM?

The Regulatory Commission of Alaska (RCA) and the Division of Oil and Gas are crunching numbers trying to make an educated guess on how much natural gas will be needed and when, Balash said.

He said it could be as long as 24 months before Alaskans know which of the options on the table pencils out best for delivering natural gas to Southcentral.

Izzo said there are several possible solutions. "But no one knows which makes the most economic sense."

Options include:

* Proving up additional reserves in known fields.

* Exploring for new fields.

* A gas line proposed by the governor to deliver North Slope gas to Southcentral markets.

* Storage to extend the life of the current Cook Inlet natural gas fields.

* Import liquefied natural gas (LNG) from other parts of the world, as Alaska already does with several other types of fuel.

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