Unocal pursues gas storage

Company submits Pretty Creek proposal, still waiting on refuge project

Posted: Tuesday, June 21, 2005

To help prevent brownouts in Southcentral Alaska and to manage gas contracts, Unocal Corp. wants to store natural gas on state lands on the west side of Cook Inlet.

If approved, this would be the first time a company had a gas storage program on state lands.

The company has already applied to store about 1.3 billion cubic feet of natural gas on federal land which is still pending approval from the Bureau of Land Management. Now they want to store about 700 million cubic feet of natural gas at the Pretty Creek gas field, near the Beluga River gas field on the Cook Inlet's west side. Pretty Creek is a field on state-leased land.

Gas storage is important to help gas producers deliver natural gas on days when the demand is highest. When weather in Alaska gets colder, the daily demand for natural gas increases, putting stress on producers' delivery systems. As natural gas production declines in Cook Inlet, there is more of a chance of having problems meeting that daily demand.

"It's basically like an insurance policy," said Kevin Tabler, manager of land and government affairs for Unocal.

The process began in February when Unocal applied to start a storage program in the Kenai National Wildlife Refuge. The U.S. Fish and Wildlife Service, which controls the surface rights to the land, approved Unocal's application. The company is waiting for approval from the Bureau of Land Management, which controls the subsurface rights in the refuge.

Tabler said their total gas storage program, which will be just under 2 billion cubic feet of gas storage capability between the two fields, would be enough to supply total gas demand in the Cook Inlet basin for just under a week. He added that this will be used only to manage the seasonal ups and downs of Unocal contracts.

He said he hopes there will be resolution on a contract for both fields by the end of the summer.

Gov. Frank Murkowski and Kenai Peninsula Borough officials have supported Unocal's efforts to start a gas storage program.

Agrium's North Kenai fertilizer plant, the ConocoPhillips and Marathon Oil Company Liquefied Natural Gas plant, electric utilities and gas utilities are the primary consumers of natural gas in Southcentral Alaska. Unocal has contracts to sell gas to Agrium and the gas utilities, such as Enstar.

In Monday's Agrium task force meeting, Will Nebesky, a commercial analyst for the Alaska Department of Natural Resources Division of Oil and Gas, said the proposed gas storage projects will not be enough to meet critical peak demand in the future as deliverability declines in Cook Inlet basin.

Using rough calculations, Nebesky said these two projects may be able to deliver 25 to 30 million cubic feet of gas per day.

Five to 10 years out, he said there could be a need to be able to deliver about 100 million cubic feet per day of natural gas at the drop of a hat. He pointed out that these calculations could fluctuate depending on future demand for gas.

Brian Havelock, natural resources specialist for the division, said the division will be prepared to accept larger storage applications in the future.

"We're happy to see these kind of efforts being put forth by the companies to solve the deliverability issues and we hope more projects continue to come online because we believe there is quite a bit yet to be done to solve deliverability problems looming on the horizon," said Bill Popp, oil, gas and mining liaison for the Kenai Peninsula Borough.

There will be a 30-day comment period before a permit is issued. The DNR expects to have a draft decision and lease issued sometime in September.

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