REI announces move to FEED for Cook Inlet gas project
Plans for a small-scale natural gas liquefaction and export facility at Port MacKenzie continue to move ahead despite current market challenges.
Resources Energy Inc. Vice President Brian Murkowski said May 30 that the company plans to move the project into the front-end engineering and design, or FEED, stage within the next few months.
Right now, work to minimize the cost of the 1 million ton per year LNG plant to less than $1 billion is ongoing, REI General Manager Mary Ann Pease said in an interview.
Gas for the plant would be sourced from Cook Inlet.
“Optimizing that cost and bringing it down as much as possible is the focus right now,” Pease said. “A billion dollars does not make a very economic project and the more we can refine that the better.”
Original capital estimates for the plant were in the $1.2 billion to $1.8 billion range. Pease has said another $1 billion would be needed to purchase a gas supply for the plant.
By comparison, the mega Alaska LNG Project to export North Slope natural gas is planned as a 20 million-ton per year project at a rough cost of more than $45 billion.
The FEED should take roughly two years, at which point a final investment decision would be made, Murkowski said. Construction would then take about another two years to put start-up sometime in 2020 or 2021, he said.
Local Japanese government officials from the Kyoto Prefecture and Maizuru City toured Port MacKenzie May 30 and said in a Matanuska-Susitna Borough release that they were impressed with the available space at the port as well as its ability to handle large vessels despite Cook Inlet’s extreme tidal fluctuations.
They also met with Mat-Su Borough officials who have long pushed for development of the industrial port site across Knik Arm from Anchorage.
Kyoto and Maizuru City are prospective purchasers of the LNG the plant would produce for municipal and industrial use.
Pease said the Japanese delegation members continue to emphasize Alaska’s ability to reliably support the country’s energy security. Alaska’s location, less than a week’s sail from East Asia, is another benefit, she said.
ConocoPhillips’ LNG plant in Nikiski started supplying the country with LNG in 1969 and REI hopes to continue that good relationship.
This time though, the Japanese delegation is interested in investing in the entire supply chain and not just purchasing LNG, she said.
Pease acknowledged the obvious challenges for any LNG export project these days, given the depressed spot market.
In April LNG sold for as low as $4 per million British thermal units delivered to East Asia, by far the lowest prices in recent years, according to the Federal Energy Regulatory Commission.
Just three years ago when REI began investigating Alaska as the location for a potential project the spot price for Asia LNG was nearly four times what it is today.
Pease said the market is simply oversupplied, but also noted an LNG plant is a long-term project.
“The primary focus right now is those continued good relationships (between Alaska and Japan) and reducing the cost — we’ve got to do that,” she said.
While Southcentral Alaska has faced natural gas shortages from Cook Inlet over the past decade, Pease echoed what regional utility leaders have said now that the market has at least temporarily stabilized by saying a new large customer would be about the best thing to spur new development for the currently constrained natural gas market.
She said all the technical data she has seen indicates ample reserves of gas still underneath the Inlet that just need a market.
“I have no concern about the long-term availability of Cook Inlet gas as long as — and this is my caveat — as long as we have an industrial anchor tenant that will be here to continue the exploration and development and then production that needs to take place,” she said.
If REI finishes the job it could be that market anchor, as 1 million tons of LNG equates to about 48 billion cubic feet of gas. That is more than half of the natural gas currently produced for use by Southcentral utilities each year.