A new revision to a study by Petrotechnical Resources of Alaska, or PRA, into Cook Inlet gas supplies makes sobering reading for anyone living in Southcentral Alaska. Essentially, the revised study has found that, in the absence of a fairly dramatic increase in the amount of gas well drilling or the discovery of a significant new gas field close to the existing gas infrastructure, supplies of gas from the Cook Inlet basin will start to fall short of gas demand perhaps as early as 2014.
Southcentral residents depend on natural gas for the heating of buildings and for about 90 percent of the region's power generation.
"Without some really large discoveries that can be brought on quickly, the current pace of development activity, even if it continues or increases, could still mean a shortfall in Cook Inlet supplies to meet our demands as early as 2014, but more likely 2015," PRA consulting petroleum engineer Pete Stokes told a meeting of the Alaska Support Industry Alliance this month.
An earlier incarnation of the PRA study, published in 2010, had predicted that without new development drilling there would be a gas shortfall in 2013. And although new gas wells and new gas compression in gas fields have boosted gas supply levels since 2010, these infrastructure additions have only moved the time of the predicted shortfall by about a year, Stokes said.
Stokes said heightened levels of gas development and exploration in the Cook Inlet basin will likely lead to an eventual improvement in the gas supply, but the lead time to bring new sources of gas on line, coupled with rates of drilling below what is required to stave off the gas production decline, make it unlikely that new gas can come on stream in sufficient quantities before perhaps 2019. That leaves a supply gap in the intervening period.
"I am concerned about the short term," Stokes said.
With no realistic possibility of bringing North Slope gas by pipeline to the Cook Inlet region before 2020, should proposals for such a pipeline come to fruition, importing liquefied or compressed natural gas from out of state must be considered to bridge the gas shortfall, Stokes said. Stokes likened the import option to an insurance policy: It might not ultimately be needed, but without the work to enable it to happen, the option will disappear.
"There is ongoing work toward this goal," he said, referring to actions that Southcentral utilities have been taking to find some way of importing gas. Although there has been much talk of importing gas in liquefied form, importing compressed natural gas from the Lower 48 may be a better option given the price differential between cheap North American gas and expensive liquefied natural gas on the Pacific Rim, Stokes said.
In conducting its study of Cook Inlet gas supplies PRA has investigated the production decline rates of the Cook Inlet gas fields and the decline characteristics of individual gas wells. The outcome of this work has been a predicted decline for the entire Cook Inlet basin if no new wells come on line.
With the export license for the LNG export facility on the Kenai Peninsula expiring in March 2013, PRA has assumed a fairly constant level of gas demand from 2014 onward, with that demand essentially coming from Southcentral gas and power utilities; from the use of gas by the oil refinery on the Kenai Peninsula; and from gas used as fuel in the operation of the Cook Inlet oil and gas fields.
PRA's predicted gas supply decline curve drops below the anticipated demand level in 2014, with the supply shortfall increasing year-on-year after that.
But this prediction of gas shortfalls is pessimistic because it assumes that no new gas wells will be drilled and that no new compression will be added to fields, Stokes explained.
In 2010 PRA tried to figure out the drilling rate required to avoid the supply shortfall and concluded that 13 to 14 new wells per year would be needed. Unfortunately, since then there have only been five or six new wells drilled per year, gas supplies have continued to decline.
PRA has found that drilling three to four wells per year, perhaps adding 10 million cubic feet per day to gas production, would still leave a supply shortfall in 2014. Upping that drilling rate to six to eight wells, increasing production by around 20 million cubic feet a day, would delay the shortfall into 2015, Stokes said.