ConocoPhillips to reopen LNG plant, resume exports
Staff at the ConocoPhillips LNG Plant in Nikiski chat on the loading terminal in this Journal file photo. The plant, which has exported LNG to Asian markets since 1969 but hasn’t made a shipment since late 2011, will resume exports in May after federal approval of the company’s export permit on April 14. The permit will authorize up to 40 billion cubic feet of exports, which will be supplied by ConocoPhillips’ Cook Inlet gas fields in addition to new companies exploring for and producing gas.
ConocoPhillips is restarting its liquefied natural gas plant on the Kenai Peninsula and will resume shipments of LNG in May, the company announced April 14. Five shipments are planned this year, ConocoPhillips spokeswoman Amy Burnett said.
The announcement came as the U.S. Department of Energy issued its approval of exports, also on April 14. DOE authorized the shipment of 40 billion cubic feet of gas over two years.
An important part of this development is that ConocoPhillips will process natural gas and market LNG for third parties, such as independent explorers now finding and developing gas in Cook Inlet.
“The 2014 export program includes a combination of ConocoPhillips and third-party gas,” Burnett confirmed in a statement.
This will provide a new market outlet for new gas producers in the region, she said. In the past, ConocoPhillips has only processed its own gas, or gas owned by Marathon Oil Co. when that company was a minority owner of the LNG plant.
Providing a market to Cook Inlet producers was part of the State of Alaska request to ConocoPhillips last fall asking for the company to apply for a renewal of its export permit, which it allowed to expire in 2012 based on limited gas supplies available to local utilities.
Now that local utilities have signed deals into 2018 with Inlet producer Hilcorp, which has purchased and revitalized former Chevron and Marathon fields, other companies exploring the Inlet will need a market if economic discoveries are made.
Meanwhile, the plant restart will be a real shot in the arm for the renewal of Cook Inlet’s oil and gas industry.
“This is great news for the cradle of Alaska’s oil and gas industry on the Kenai Peninsula,” said Alaska U.S. Sen. Mark Begich, who worked with the DOE on the approval. “With plenty of gas available to meet local needs through at least 2018, we’re seeing the kind of job growth responsible oil and gas development can provide.”
The federal agency had agreed earlier that ConocoPhillips can export to nations that are in Free Trade Agreements with the U.S., such as South Korea. Exports to those nations are approved by DOE with a streamlined process.
The April 14 approval by DOE, however, extended that to countries who are not in free trade agreements, such as Japan. ConocoPhillips has mainly exported LNG to Japan in the past although there have been shipments to Korea.
Begich had pushed the DOE to process the ConocoPhillips application to ship to non-Free Trade Agreement countries outside the queue DOE has set up for non-FTA LNG export projects.
“DOE has approved only six applications from Lower 48 projects in that queue since 2012, and at least 24 applications remain in the queue,” Begich said in a statement.
Except for Alaska’s project, LNG export proposals seeking DOE approval are all Lower 48 plants. Those have sparked sharp controversy over the possibility that exports could result in higher domestic prices for natural gas, and opposition to exports from U.S. industries, such as chemical manufacturers, that benefit from low-cost gas used as feedstock.
Begich pressed the case for Alaska being treated differently “I asked Acting Assistant Secretary for Fossil Energy, Chris Smith, to visit the plant last summer, and familiarize himself with our industry, our workforce and the unique situation of our country’s only LNG export plant with a safe track record spanning four decades,” Begich said. “That visit is paying dividends today.”
Burnett said the reopening will not result in any significant increase in employment at the LNG plant because most of its employees were retained when the plant went into mothball status.
Exports were stopped in 2012 because of shortages of natural gas in Cook Inlet fields. The gas supply situation has now improved due to new drilling to the point that a surplus would be available for export during summer.
In winter, however, gas production will be reserved for local utilities.
Tim Bradner can be reached at email@example.com.