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At state's urging, ConocoPhillips applies for natural gas export license

Suzanna CaldwellAlaska Dispatch News

Exports of liquefied natural gas could resume soon on the Kenai Peninsula, at least if ConocoPhillips has its way.

Wednesday the producer filed with the U.S. Department of Energy for a permit to resume exports of LNG from its currently mothballed Nikiski facility, months after the state encouraged the company to do so.

ConocoPhillips spokeswoman Natalie Lowman said the company would only consider resuming exports if local gas needs were met and supplies were sufficient.

“Both of those conditions have been met,” she said.

The company's last export license expired in March, with its last tanker of gas leaving the plant in October 2012. If the current license is approved, the company could export up to 40 billion cubic feet of gas over a two-year period.

The thought of even considering exports is a marked change from last year, when utilities warned Southcentral residents of an impending shortage. Last summer, consultants said not enough wells were coming on line fast enough to meet demand. After 2014, supplies looked dicey.

But that changed this spring, when utilities and producers announced they had secured gas supply contracts through 2018. While a shortage no longer seems imminent, utilities have noted that “black holes” in natural gas supplies beyond 2018 remain.

The Department of Natural Resources sent a letter to ConocoPhillips in September, asking the company to consider resuming exports in an effort to spur exploration in the region. Estimates say there's up to 19 trillion cubic feet of gas in Cook Inlet, though there have been no major gas field finds in recent years.

Lowman said that the state's urging and meetings with local stakeholders were factors in the decision to apply for for the license.

High praise from stakeholders

Department of Natural Resources Commissioner Joe Balash called the decision to seek the license positive.

“In order to sustain the Cook Inlet renaissance, we need additional market opportunities and access to markets,” he said in a statement issued Thursday. “This is the best opportunity for near-term market growth beyond the local utility market.”

Even Enstar, which last month said it had no opinion either way on exports, saw the announcement as a good thing. Spokesman John Sims said the natural gas utility has worked closely with ConocoPhillips to understand the scope of the exports and how that would play into local demands.

“Fundamentally, we understand the positive impacts (getting the export license) will have on the state,” Sims said Thursday.

Speaker of the House Mike Chenault, R-Nikiski, also praised Conoco's decision, saying it would be a boon not only to the local economy but to Cook Inlet and the state in general.

While Southcentral Alaska clamors for gas in the winter, warm temperatures keep demand low in the summer. The wells still need to keep producing and the lack of market means wells might face “shut-ins” that can damage their long-term ability to produce gas. Chenault was optimistic that if the company secures the license it will reinvigorate the Cook Inlet market. 

Chenault said the possible reopening of the LNG plant could spur the exploration needed to land that elusive big find in the Inlet. He said the Agrium fertilizer plant, which closed around the same time as the LNG facility, has discussed reopening if a big enough gas supply were found.

“Opportunities abound,” Chenault said. “It's just a matter of putting the pieces of the jigsaw puzzle together.”

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