Enstar hopes for Nenana gas

Posted: Friday, June 24, 2005

Enstar Natural Gas Co. is looking at natural gas from the Nenana Basin near Fairbanks as a way to bring some more natural gas to Southcentral Alaska.

Enstar is a utility that delivers natural gas to more than half of the state's population.

No natural gas has been found there yet, but Andex Resources, LLC, the company that plans to explore there, thinks there could be a lot of gas in the area.

"Right now we're optimistic about the Nenana Basin," said Enstar President and CEO Tony Izzo at Wednesday's Kenai Chamber of Commerce luncheon.

He said there is a chance gas from the Nenana Basin could be delivered to Cook Inlet before North Slope gas was available. Enstar has been looking closely at investing in a pipeline from Nenana to the inlet if natural gas is found, he said, adding they have engineers looking at the project.

Demand for natural gas in the region is increasing, and by 2009, Enstar will not have enough to meet that demand, Izzo said.

In addition to looking at pipeline projects, Izzo said they are looking at importing liquefied natural gas as a temporary solution to gas shortages.

Houston-based Andex completed seismic work — a way to assess the geology of an area — in the Nenana Basin in March and just completed interpreting the data, said Andex President Tom Dodds.

He said they believe there could be between 1 trillion to 3 trillion cubic feet of gas in the area. Andex hopes to start drilling in the area as soon as January, he said.

"It would take care of Cook Inlet (and Fairbanks) demand for quite some time," he said. "We hope that we find natural gas, and we hope it's commercial."

Andex has partnered with Doyon Ltd., Usibelli Energy, LLC, and Arctic Slope Regional Corp. in this project, Dodds said.

If they find commercial quantities of gas, he said Andex would be interested in investing in a pipeline to the inlet. Andex has met with Enstar about partnering on that project, Dodds said.

Izzo said later this pipeline could be extended to access North Slope gas, as well.

A pipeline delivering natural gas from the Nenana Basin is only one proposal on how to get large quantities of natural gas to Southcentral Alaska.

The Alaska Natural Gas Development Authority, a state corporation, is looking at building a pipeline that connects to a proposed larger North Slope pipeline in Glennallen.

They also are considering a bullet line that would deliver gas directly from the North Slope to the region. The spur line would be a 24-inch high pressure line and could transport 1 billion cubic feet of gas per day to the region.

At the luncheon, Izzo said Enstar is supportive of any project that can bring natural gas to the region and has been working with ANGDA. He did not say he supported one project more than another but said he is excited about Nenana.

"That's the one I'm doing the engineering on," he said.

ANGDA is not in a competition with Enstar, said ANGDA CEO Harold Heinze.

"We are working with Enstar in as coordinated and as cooperative way as we can," he said. "It would make no sense for us to duplicate each other."

Heinze said despite all of the potential in the Nenana Basin, they are in the early stage of knowledge on the area and odds are against finding large quantities of gas.

Heinze and Jim Posey, general manager of Municipal Light and Power in Anchorage, have said publicly that for a pipeline project that brings North Slope gas to Southcentral Alaska to be economical there must be industrial users to help share the cost of transporting the gas.

Izzo disagreed at the luncheon.

If a person's average monthly gas bill in the winter is $200, it would increase to $646 if they switched to fuel oil, he said. If they used propane it would increase to $1,062, he said.

Enstar spokesperson Curtis Thayer said even without industrial users to share the transportation costs, delivering natural gas through a spur line or a Nenana Basin pipeline would still be cheaper than using fuel oil or propane by at least half.

"No line is the worst situation," Izzo said.

Responding to Izzo and Thayer's comments, Heinze said a spur line could be economical without industrial users, but it would significantly raise the cost.

"It's pretty costly, but his point's probably pretty valid," Heinze said. "In the case of a spur line, it would be pretty helpful to have some industrial customers to pay the bill. If you're going to get to a discount (on the gas), you're going to need some industrial customers hanging around."

If they build a bullet line directly from the North Slope to Cook Inlet, Heinze said he did not believe it would be economical without industrial users.

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