For starters, not enough new gas wells are being drilled, and those we're drilling aren't finding enough. The gas distribution system is stressed in cold weather, and there's concern we could face shortages this winter if there are equipment malfunctions. The real concern, however, is for two or three years from now, when the annual production of gas is likely to dip below what we need.
Not a pretty picture. Undoubtedly there's more gas to be discovered in the region but we have to get those drill bits turning.
What's to be done?
If I were an energy king with sweeping powers I would make sure certain things happen.
First, we need to get those rigs fired up. There's willingness in industry to explore -- geologists actually consider Cook Inlet under-explored -- but it can take years to get government permits for a new exploration well in some promising onshore areas like federal lands on the Kenai Peninsula.
Not much our state energy king can do to goose the federal agencies, but our congressional delegation could help.
COOK INLET HAS POTENTIAL
Some of the more prospective areas for exploration, however, are offshore in deeper waters of Cook Inlet. To drill these, explorers need to bring in a mobile "jack-up" rig. This is a special rig that floats in, plants steel legs on the ocean bottom and jacks itself up off the water. It takes a lot of money. A small, independent company is now working to make this happen, but times are tough in the oil and gas business and there are challenges in financing the venture.
It's in our strategic interest that this special rig be brought north to drill. We need to help this initiative to the degree we can.
Before we spend a lot of money on bringing down North Slope gas, we need to know what we have closer to home.
Once companies find gas, they need a place to sell it. Some good news here is that the Regulatory Commission of Alaska, which must approve contracts with utilities, is closer to finding an acceptable way to price gas produced locally. One new contract, for Chugach Electric, has been approved.
Another thing needed is to secure more gas storage so surplus gas produced in the summer can be stored for the winter, which helps ensure the winter supply. This would seem a no-brainer -- it's typical in the Lower 48 -- but there are complications.
The best place to store gas is in a depleted underground reservoir where the gas pumped in during summer can be taken out in winter. However, finding the right reservoir isn't easy. You want to make sure gas pumped in can be pumped out again. It isn't cheap, either.
Marathon Oil and Chevron now have gas storage for their customers, mainly the utilities. More is needed, however. Enstar Natural Gas Co. is working on gas storage.
PUSH FOR NORTH SLOPE GAS
Finally, we need to put more steam into efforts under way now to get North Slope gas to Southcentral Alaska. This may be the ultimate answer to the problem.
We have good people working on it, however.
One effort, by the Alaska Natural Gas Development Authority, a state corporation, is focused on plans for a 24-inch "spur" pipeline that would connect with a big gas pipeline built from the North Slope to the Lower 48 through Interior Alaska.
A second effort, led by state agencies, is focused on a "bullet line" built all the way from the Slope to Southcentral, as a contingency in case the big pipeline doesn't go.
Plans are for a private company to build these projects, although the state is doing some work on permits and conceptual engineering. These are good efforts, but neither a spur nor bullet line will work unless we have industrial customers to share the pipeline capacity with consumers. Without them, we can't afford North Slope gas.
Unfortunately, the list of industrial customers is pretty short. A fertilizer plant near Kenai is closed, and the future of a nearby liquefied natural gas, or LNG, plant is uncertain because a key federal permit for the plant expires in 2011.
There are possibilities, however. ANGDA, the gas authority, is exploring the potential for a petrochemical plant using natural gas liquids that could be brought down a spur or bullet line. Another prospect getting attention now is a plant that would make liquid fuels, and possibly other products including petrochemicals, from natural gas. There are firms interested in this, and the state should try to work with them.
The Achilles heel of the bullet or spur line is getting industrial customers. We need to be doing more work to get them.
If we don't get them, and we don't find a lot of new gas in the Inlet, it's almost a sure bet we'll soon be importing liquefied natural gas. That won't be cheap for consumers, either. What an irony for a state rich in petroleum resources.
Tim Bradner writes for an Alaska economic reporting service. He also consults for private clients and writes for business publications, as well as a regular column for the Daily News.
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