Interior gas project finalists narrowed to two: one from Slope, one from Inlet

Interior residents will have to wait a little longer to hear who their new supplier of natural gas will be, but the Alaska Industrial Development and Export Authority has narrowed its project partner options to two: Spectrum LNG and Salix Inc.

AIDEA Interior Energy Project manager Bob Shefchik said during the authority’s Dec. 3 board meeting — when a private Interior Energy Project partner recommendation was expected — that pushing the decision back about six weeks to late January would allow the project evaluation team to more thoroughly vet the best and final offers from Salix and Spectrum.

The final offers by five project finalists were submitted in late October and Salix and Spectrum quickly separated themselves from the other proposals, Shefchik said.

AIDEA’s project evaluation team then reached a consensus that more time was needed to fully vet the finalists’ cost projections to make sure the best plan is chosen.

The delay should not have much impact on the timeline of the project. Spectrum has touted an ability to get natural gas to Fairbanks early in 2017, while Salix has said it could be ready for production by January 2018.

While the race to supply Interior Alaska with liquefied natural gas is too close to call, the leading companies have plans coming from opposite ends of Alaska.

Salix Inc., a subsidiary of the Pacific Northwest utility company Avista Corp., is proposing a Southcentral LNG plant with an initial liquefaction tolling fee of $2.87 per thousand cubic feet, or mcf, of natural gas. Costs for wholesale gas, trucking to Fairbanks, regasification of the LNG and final distribution to customers would still have to be added to the tolling fee.

The goal of the Interior Energy Project is to supply Fairbanks residents with natural gas at a final, burner tip price of roughly $15 per mcf, which is the energy equivalent of fuel oil at about $2 per gallon.

Spectrum LNG vied to participate in the first go-round of the project early in 2014, but with a different financing plan for its North Slope LNG plant. This time, the Tulsa, Okla.-based company is proposing a North Slope LNG plant that would produce LNG — wholesale gas cost included — for $5.06 per mcf, leaving a $10 gap available for trucking and distribution costs to still meet project goals.

Shefchick said the expectations for costs on the Slope are much better than the first attempt of the project, which was doomed by high plant construction costs.

Wholesale natural gas on the North Slope costs roughly a third of what it does from Cook Inlet: however, working on the Slope also includes higher capital, operating and trucking costs, which keep Cook Inlet options competitive.

Spectrum leadership helped develop Fairbanks Natural Gas’ LNG supply chain in the late 1990s. The company currently operates a small LNG plant in Arizona that supplies LNG for vehicle use.

Updated: 
12/03/2015 - 4:30pm