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ConocoPhillips moves toward shutting down Kenai LNG facility that once blazed trail

Amid a global glut of natural gas, ConocoPhillips is taking steps that could lead to the shutdown of the historic Kenai LNG facility. But instead of putting the plant into a deep-freeze, the oil giant plans a "warm" standby.

In other words, LNG would no longer be stored there. As a result, tanks would no longer be kept cold, a requirement because of the low temperatures at which liquefied natural gas is stored — 260 degrees below zero.

The nearly 50-year-old plant, once the largest of its kind in the world but now considered small, hasn't shipped a tanker load of LNG since 2015. ConocoPhillips, which hopes to sell the asset as part of its effort to exit Cook Inlet, is still talking with possible buyers and hasn't reached a deal.

Amy Burnett, a ConocoPhillips spokeswoman, said in an emailed statement Friday that ConocoPhillips will further "scale back operations." Also, the oil giant will start planning for a shutdown.

"While marketing efforts have been underway since mid-January 2017, and conversations with interested buyers are ongoing, to date ConocoPhillips has not come to terms with a buyer for the facility," Burnett said.

The Alaska Gasline Development Corp. has been interested in the plant, but has said the money for an acquisition would have to come from a different source.

The agency is pursuing a giant LNG-export project tapping North Slope gas — the $43 billion Alaska LNG project. Alaska ownership could meet a state goal by hauling liquefied gas from Cook Inlet to Fairbanks to provide low-cost energy to Interior Alaska, officials have said.

Rosetta Alcantra, a communications officer at AGDC, said on Friday she could not comment on whether the agency is still involved in talks about a possible acquisition.

Burnett also would not provide details about prospective buyers or negotiations.

The Kenai plant began producing LNG in 1969, following the construction of several oil and gas offshore production platforms in Cook Inlet. It was the second plant of its kind in the world and the first to serve markets in the Asia-Pacific region. Two Japanese utilities were longtime customers.

Larry Persily, chief of staff to Kenai Peninsula Borough Mayor Mike Navarre, said the facility isn't competitive amid low global prices for LNG.

The potential closure of the plant shouldn't be seen as a dark cloud for the Alaska LNG project, Persily said. That project has its own unrelated problems, such as high costs that hurt its global competitiveness.

"It's a reminder to Alaska that just because we have oil and gas doesn't mean someone will spend their money to buy and produce it," he said. "It has to be price competitive."

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