Fairbanks natural gas plans North Slope facility: as Cook Inlet supplies dwindle, Fairbanks taps into the North Slope.

• Author: Liles, Patricia

Given the lack of development of alternative natural gas supplies in the Interior and the dwindling supply of Cook Inlet gas causing availability issues and price increases, Fairbanks Natural Gas is eyeing vast supplies of North Slope gas as its future feedstock.

The Fairbanks-based gas supplier, which currently buys Cook Inlet gas and trucks it north to the Interior for use by its 900-plus customer base, is making plans to develop a liquefied natural gas facility on the North Slope.

"We will build a new facility to tap the abundant long-term gas supply and begin trucking the supply from the North Slope rather than Cook Inlet," said Dan Britton, president of Fairbanks Natural Gas.

In late October, the company was working to finalize a lease for property at Deadhorse and to negotiate a supply contract with North Slope gas owners. Fairbanks Natural Gas applied this fall to governmental regulators for permits to construct a facility, with the goal of construction taking place in the summer of 2007.

"We have the potential for gas shipments to begin in the fall of 2007," Britton said. "It's an aggressive schedule."

UP TO $10 MILLION INVESTMENT

Estimated cost for construction of a new LNG facility on the North Slope ranges from $6 million to $10 million, he said. The company is still in the engineering phase of the project.

Once completed, the North Slope facility will add 140 miles each way for the specialized tanker trucks that currently carry LNG from the north side of Cook Inlet, at Point MacKenzie, to Fairbanks, a 350-mile trip.

Trucking LNG down the Dalton Highway--a mostly gravel, industrial route with significant driving and road hazards-will be more expensive and add to maintenance costs for the tanker trucks, Britton said. But those increased transportation costs and escalating gas feedstock prices will likely be offset by savings in North Slope gas prices, compared to the ever-increasing Cook Inlet gas costs, he said.

"We also do achieve better efficiencies (for LNG production) because of the ambient temperature on the North Slope," Britton added.

CONTRACT WITH PRODUCERS IN NEGOTIATION

How it will all pencil out remains to be seen, as the company is still negotiating a gas supply contract with North Slope producers.

The need for an alternative supply became crystal clear to Fairbanks Natural Gas earlier this year as the company's past supplier, Aurora Gas LLC, gave the Fairbanks-based company about a month's notice that it would stop...