Extension could mean additional energy for future

Editorial

Posted: Friday, January 26, 2007

What do the Kenai Peninsula and Japan have in common?

If an export license filed by ConocoPhillips and Marathon Oil Corp. for a two-year extension is approved, we’ll both be getting liquefied natural gas from their plant in North Kenai.

At a time when many companies are looking to expand their resources in search of more viable means to produce energy, the request for the extension is good news for the peninsula. Not only does it mean the plant has exceeded its ability to produce original estimates, but it also means the 58 employees and the 128 jobs the plant supports on the peninsula will remain in place longer than expected.

The current contract expires in March 2009, but the companies are convinced that extending it to 2011 is not a problem.

“This extension will mean continued investments in the development of Cook Inlet gas resources and will maintain high-paying jobs in the community,” said Darren Jones, vice president of Alaska commercial assets for ConocoPhillips.

According to a study by the Department of Energy, the Cook Inlet Basin is thought to contain about 13 trillion to 17 trillion cubic feet of undiscovered gas. The Alaska Department of Natural Resources figures there are roughly 1.6 trillion cubic feet of known reserves, according to Jones.

“We see about 1.7 trillion cubic feet, so our numbers are not far off,” Jones said.

At a consumption rate of 150 billion cubic feet a year, that’s about 11.3 years’ worth.

The plant exports between 40 billion and 50 billion cubic feet of gas each year to Japan, serving the Tokyo Electric Power Co. and Tokyo Gas Co. The rest of the gas passing through the plant each year is used domestically.

Even better, the companies plan to look into even more development. If the extension is granted, ConocoPhillips plans to invest in and drill two to four new wells at its Tyonek Platform in the North Cook Inlet Unit, Jones said. Those wells could last 10 to 15 years.

John Barnes, Marathon’s manager of Alaska production operations, said Marathon hopes to be able to continue exploration and development activity similar to what it’s been doing in recent years.

Considering the plant originally began operating in 1969, and it’s the only LNG export facility in North America, it’s well exceeded its original purpose.

The anticipated decision on the extension request to the Department of Energy may take up to six months, officials are guessing. The last five-year extension took two years to win approval, in part because of concerns over the continued availability of gas for domestic consumers. This time the process likely is to focus on assuring that local demands are met, a concern both companies say is not an issue.

“Our extension takes into account the local utility needs,” Jones said.

In addition, hundreds of exploration, production and oil field service jobs in Cook Inlet are tied to providing gas to the facility. State and local economies benefit from about $50 million in annual royalties and taxes, officials say.

The companies believe Cook Inlet has sufficient gas resources to maintain a strong industrial base on the Kenai Peninsula, and that the extension would provide incentive for further gas development.

Given the plant’s success and the fact that there obviously is more to produce and even more resources that haven’t been tapped, we’re optimistic the Department of Energy will see the extension as a positive step in many ways — energy now and down the road and the benefits to the community, region and state.

It really is a win-win situation. To decide otherwise would be detrimental.



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