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IGU board approves another cost increase for Fairbanks LNG tank
Alan Bailey Petroleum News
There has been a further increase in the cost of building a large liquefied natural gas tank in Fairbanks, as part of a project to bring an expanded natural gas supply to the city. The Interior Gas Utility is constructing the tank as part of the Interior Energy Project, sponsored by the Alaska Industrial Development and Export Authority.
Construction of the 5.25 million-gallon tank began in December 2017, with the intent of completing the tank by the end of this year, to qualify for a state tax credit. The estimated cost was $48.7 million. However, while the construction of the tank itself moved forward, work on support facilities such as pumping systems, vaporizing systems and facilities for unloading tankers delivering LNG to the tank had yet to be contracted.
In September the IGU board approved an increase in the cost to $52.6 million, as a consequence of unanticipated complications associated with refrigeration of the soil around the tank. Now the bids for construction of the support facilities have come in substantially higher than originally estimated. As a consequence, on Feb. 12 the IGU board approved a further increase in the budget for the tank, to $56.7 million. Dan Britton, IGU general manager, told the board that there are sufficient funds to cover the increased costs but that, as a result of the higher cost, further financial assurance would be needed for planned work on LNG storage facilities at North Pole.
Bids higher than estimates David Prusak, project manager for the LNG storage tank construction, told the board that originally $4.8 million had been allocated for the construction of the support facilities. However, the engineer’s estimate, prior to inviting bids for the work, had been $6.7 million. In the event IGU received four bids, with costs ranging from $9.8 million to $14.3 million. Under the terms for the bidding, IGU is obliged to accept the lowest bid, which came from engineering firm Price Gregory. Hence the revised cost of $56.7 million for the complete construction of the storage facility.
Prusak listed a number of items that appeared to have contributed to the cost increase, including a decision by IGU to increase the number of pumps and vaporizers in the facility from two to three, to ensure continuity of gas supplies in Fairbanks should one of these pieces of equipment fail. Other issues include an increase in the cost of materials such as steel, in part because of import tariffs. The design now incorporates an arrangement whereby LNG trucks can feed LNG directly into vaporizers, should access to the tank be lost. Heightened cybersecurity has emerged as an issue. And the proposed design involves an expensive construction arrangement for the fence surrounding the facility, to prevent the fence moving due to permafrost instability - apparently federal law requires a facility of this type to be enclosed by an adequate security fence.
- ALAN BAILEY
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