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Legislative change supports gas storage
Hilcorp Storage applies to RCA for certificate of public convenience and necessity for public gas storage facility at Kenai field
Kristen Nelson Petroleum News
Hilcorp Alaska operates natural gas storage for its own use at three of its Cook Inlet fields -- Kenai, Pretty Creek and Swanson River. Under legislation passed last year, Hilcorp subsidiary Hilcorp Storage has applied to the Regulatory Commission of Alaska for a certificate of public convenience and necessity to operate natural gas storage facilities at its Kenai gas field "to meet current and future needs of Alaska natural gas customers and enhance the deliverability and geographic diversity of natural gas storage during cold winter weather and other times when natural gas demand in Southcentral Alaska is especially high."
Senate Bill 220, wrapped into House Bill 50 at the end of the last session of the Alaska Legislature, provided RCA with oversight of natural gas storage service and liquefied natural gas storage even if the storage is part of a facility operated by a natural gas pipeline carrier.
The intention of the legislative change was to mandate RCA regulation for any gas storage facility where storage services are being provided for an entity other than the facility's owner and where the facility owner does not own the gas.
CINGSA, Cook Inlet Natural Gas Storage Alaska, is currently the only RCA-regulated gas storage facility in the state.
Alaska Oil and Gas Conservation Commission production data for November show volumes of gas produced from storage as about equally divided between CINGSA and existing gas storage at the Kenai field, with 48.37% from CINGSA and 51.63% from the Kenai gas field.
Hilcorp Storage Hilcorp Storage was established in 2024 to store and deliver natural gas in Cook Inlet. Hilcorp Storage is a Delaware limited liability company wholly owned by Hilcorp Alaska.
Hilcorp said existing facilities at the Kenai gas field have been producing gas since 1961 and operating as a gas storage facility since 2006, with 16 wells permitted for underground storage operations. The facility has a storage injection order issued by AOGCC to Marathon in 2006 to inject gas during the summer for withdrawal for sale during the winter.
The Kenai gas field was originally designed and operated to produce native gas and gas from production pads in the field can flow at low pressure, 50-250 psig (a measurement relative to ambient atmospheric pressure), medium pressure, 250-750 psig and high pressure, more than 750 psig.
Low pressure wells flow to the first-stage compressors at the KGF Pad 34-31 or KGF Pad 14-06, with medium pressure gas discharged from those compressors or flowing directly from medium pressure production wells, with high pressure gas discharged from second-stage compression or directly from high pressure wells.
The field has both 24-inch low pressure and 20-inch medium pressure bi-directional pipelines running from Pad 14-6 to Pad 34-31, both terminating in compression at the pads with the gas injected into storage or sent to the sales line.
After compression and dehydration, high pressure gas enters a 20-inch line delivering sales quality gas to another pipeline operator for gas sales or is injected into onsite storage wells.
Gas produced by Hilcorp Alaska elsewhere in Cook Inlet also flows into the Kenai storage facilities, with non-native gas transported to KGF Pad 34-31 via the 20-inch sales line, and either routed to a 16-inch sales line for delivery or injected into onsite storage in well KU 21-06RD. Hilcorp said non-native gas can also flow to Pad 14-06.
Hilcorp said no new pipeline connection or construction is required for Hilcorp Storage to provide the storage described in the application, with third parties using common carrier lines to nominate gas into the Kenai storage facilities.
Capacity Current storage capacity at the Kenai field is 38 billion cubic feet, with maximum deliverability of 130 million cubic feet per day and the facilities' well stock capacity at 80 million cubic feet per day at 220 psi reservoir pressure.
Hilcorp said its customers have asked for additional gas storage options in Cook Inlet, with additional storage services able to "increase reliability an alleviate mismatches in supply and demand cycles inherent in a sub-Arctic climate."
With additional storage volumes from Hilcorp Storage, deliverability of existing well stock should increase to current facility capacity of 130 million cubic feet per day with additional facilities and well investments capable of increasing that capacity.
The company said that, in theory, with the combination of increased storage volumes and additional compressors resulting in increased reservoir pressure, it could deliver up to 225 million cubic feet per day from the Kenai gas field facilities.
The facility has an expected life of over 20 years from today, and that life could be extended through continued maintenance and investment.
CINGSA's website shows that facility with a withdrawal design capacity of 150 million cubic feet per day and a facility withdrawal capacity of 143.9 million cubic feet per day.
Need for gas storage Hilcorp said the Kenai storage facilities "are required by the present and future needs of natural gas customers in Southcentral Alaska. With declining field pressures, Cook Inlet gas producers are increasingly unable to meet peak deliverability during high demand periods."
As recently as January 2024, the company said, "demand for deliverable natural gas very nearly outstripped supply during a cold snap, even though that supply was augmented by stored natural gas in the single natural gas storage facility which has been certificated to date."
Initial third-party storage needs will not require new facility projects at the Kenai storage facility, Hilcorp said. It estimated annual operating costs for the KGF storage facilities, exclusive of administrative operation, at some $7.705 million, an estimate calculated by allocating operating expenses "between native gas production and gas storage by proportion of facility utilization and by gas handling volume in the prior calendar year," with gas storage in 2023 utilizing 48.67% of gas handling by volume.
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