Cost increases for Fairbanks LNG storage tank

Alan Bailey

Petroleum News

The projected cost of a large, new liquefied natural gas storage tank, being constructed in Fairbanks by the Interior Gas Utility, has increased from $48.7 million to $54.2 million, IGU management reported to the IGU board on Sept. 18.

The tank is being constructed to support an enlarged gas supply for residents and businesses in the Fairbanks region, as part of the Alaska Industrial Development and Export Authority’s Interior Energy Project.

It appears that a major reason for the cost uptick was a discovery, during excavation of the foundations for the tank, that additional refrigeration would be needed of soil outside of the area of the tank itself. Deeper excavation is required than originally planned, and there has been an increase in the cost of steel required for the project, Dan Britton, IGU general manager, reported to the board.

The board passed a resolution approving the change to the storage tank budget but also expressed significant concern about any budget overrun.

Additional money spent on the tank could impact funding availability for other aspects of IGU’s efforts to expand gas supplies for Fairbanks.

Moreover, the cost of developing the infrastructure that supports the gas supply impacts the cost of gas delivered to gas customers. This cost, in turn, would impact the demand for gas in Fairbanks - the level of gas demand is a critical factor in the economics of the expanded gas supply