Explanation of LNG Closure

By Dave Donaldson

The LNG treatment plant in Nikiski could be used to store imported Liquefied Natural Gas for winter use by South Central utilities.

Conoco-Philips and Marathon have decided to close the liquefaction plant this Spring after shipping gas to Japan for the past forty one years.  Conoco-Philips’ Cook Inlet Asset Manager Dan Clark Tuesday told members of the state House that the plans now call for preserving the facility for future options that arise.

He says the company will fulfill two firm delivery contracts with Chugach Electric and one non-firm contract with  Enstar.   However, he told the lawmakers that one option for its long-term future could involve retrofitting the plant to treat imported gas from overseas sources.

The plant has been liquefying, storing into tanks and exporting through tankers.  Obviously, those tankers could pull up to that same dock.  There would have to be some piping modifications to allow LNG to flow from the dock back to the tanks. So there would be piping modifications associated with that.  The LNG would be stored in those tanks and then if that LNG were needed for the local market, what would happen is facilities would have to be installed that could take the LNG out of the tanks, heat it up and vaporize it into a gas form and put it into the pipelines that are located nearby.

Clark gave no estimate for the cost of making the modifications to receive imported gas for local use.   However,  he said re-opening a liquefaction plant to fulfill any long-term export contract would cost “hundreds of millions of dollars.”


Clark says he anticipates that new gas exploration will stop in the Cook Inlet – and many existing wells will be closed because of the lack of a substantial, year-round market.  With winter demand sometimes reaching twelve times summer demand, the LNG plant has been able to divert its gas to meet those peak needs.  Without the plant in operation, he says the best hope for a seasonal gas supply for SouthCentral will be met by underground storage facilities.

It’s an underground reservoir where gas could be injected into in the summer and gas taken back out in the winter during times of need.  What that project will do is help flatten out that demand so that if there is excess deliverability in the summer, production could flow into that facility and the utilities could pull it out in time of winter.   But until that storage facility is in place,  that capability is not there.

Necessary permits have been issued for the underground storage facilities – and work done this year is expected to make it ready to receive gas in the summer of 2012 and have excess for local use the following winter.


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