Cook Inlet gas: uncertainty in supply and demand.

AuthorBradner, Mike
PositionSPECIAL SECTION: Oil & Gas

There are concerns about natural gas supply in Southcentral Alaska. Gas fields in the region, discovered in the 1960s and 1970s, are being depleted. Southcentral utilities have estimated that annual gas supply may fall short of demand by 2014 or 2015 and are working on plans to import liquefied natural gas or compressed natural gas as a contingency.

Meanwhile, citing the gas shortage, ConocoPhillips has opted not to renew the liquefied natural gas export license for the company's LNG plant at Nikiski, near Kenai. The North Cook Inlet gas field, which supplied the plant, still operates and now supplies the utilities. The plant is mothballed; however, it is being maintained in a state to restart if there are new gas discoveries or the plant can be used in some other way, such as an LNG import facility.

Despite the apparent shortages, the state of Alaska believes there are substantial undiscovered gas resources in Cook Inlet. Department of Natural Resources Commissioner Dan Sullivan (no relation to Anchorage Mayor Dan Sullivan) acknowledges the utilities' concerns, but says that with additional drilling and investment in the existing fields, there could be new gas reserves and production.

"Cook Inlet is a maturing oil and gas basin. While there are legitimate concerns about contractual shortfalls of natural gas in 2014 and 2015, there are still large volumes of gas to be discovered and developed in small to intermediate-size fields," Sullivan told Anchorage Mayor Dan Sullivan's Energy Task Force March 14.

Uncertainties

There are uncertainties, however. "Cook Inlet is currently witnessing a transition from larger producers like Chevron and Marathon to mid-size and smaller companies, like Hilcorp, Apache and NordAq," the commissioner said.

"Generally, we see this as a positive trend, but transitions can slow actions and increase uncertainty," particularly in a small market like Cook Inlet where there are a number of stakeholders, including utilities, producers, explorers, regulators and the state and federal governments, Sullivan said.

In their studies of gas remaining in the producing fields, the utilities have used a very conservative method, a "decline curve analysis." This is appropriate for utilities, due to the legal requirement to assure their customers of service. "Utilities have a laser focus on the volume of gas available for contracts," to supply gas, the commissioner said.

However, to get a bigger picture the DNR can use other...

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