Less than a decade: firewood for fuel? There is a shortage of gas in Cook Inlet, but is it all doom and gloom or will new exploration or a gas line come to the rescue?

• Author: Bradner, Mike

Is s Cook Inlet running out of natural gas? Some believe so, and the arithmetic shows why: 9 trillion cubic feet of gas have been discovered in the region. Seven trillion cubic feet have been used over 35 to 40 years. Two trillion cubic feet are left.

Some say we may be out looking for firewood in a decade or so.

But hold on. A funny thing is happening. Natural gas prices are rising, and while nobody likes higher utility bills, companies are out exploring for, and finding, new gas because prices are higher.

For years, Southcentral Alaska luxuriated in the lowest gas prices in the nation. But because of that no one looked for new gas.

Now the decline in Cook Inlet Basin's proven reserves appears to have stabilized. In December 2004, there were even slightly higher reserves than in December 2003, although the Alaska Department of Natural Resources, which compiles the data, warns that the apparent increase may be more a statistical blip than real.

According to the DNR's report, gas fields in the Cook Inlet Basin held 2.087 trillion cubic feet of proven reserves last December, and 2.032 trillion feet in December a year earlier.

However, the same report shows that 208 billion cubic feet of gas was used for fuel and manufacturing in 2004, which means gas producers like Marathon Oil Co. and Unocal Corp., as well as independent companies like Aurora Gas LLC, are replacing what is produced, and that's really encouraging. It was also a warm winter, which meant less gas was used.

THE HEYDAY

Almost all of the historic gas found in Southcentral--the 9 trillion cubic feet--was found when companies were looking for oil during the heyday of Cook Inlet exploration. Most of the exploration was in the 1960s.

In 1969, after the big North Slope oil fields were discovered, industry's attention shifted northward. Exploration in Southcentral slowed to a crawl, and there were no significant discoveries, oil or gas, until just recently.

Initially the 9 trillion cubic feet that had been found was "stranded," with no markets. That's why it was cheap. Anchorage worked quickly to replace coal and fuel oil with clean-burning gas. Three companies that had found large gas fields--Marathon, Unocal and Phillips Petroleum Co. (now ConocoPhillips)--worked on ways to commercialize their stranded assets.

Unocal built a fertilizer plant, today owned by Agrium Corp. Marathon and Phillips launched a daring innovation, the world's first long-distance liquefied natural gas (LNG) transportation from Alaska to Japan. The LNG plant built at Nikiski has been operated by the two companies ever since, never missing a shipment.

But because there was no exploration for new gas, the reserve base declined, and gradually what was once a 50-year supply of gas became less than a 10-year supply.

NO WORRIES

Is that cause for concern? Many don't think so. A reserves life of 9 years, about where Southcentral now is, depending on how the calculation is done, is basically about where gas prices start rising, stimulating exploration. New exploration leads to new discoveries. It's exactly what is happening.

But prices are indeed rising, and fast. The average Cook Inlet sales price for gas (what producers sell gas to local utilities...