On Jan. 8 Enstar Natural Gas Co., the gas utility for Southcentral Alaska, announced that on Dec.17 it had signed an exclusivity agreement with New York based Glenfarne Energy Transition to jointly work on a project to import liquefied natural gas to Southcentral Alaska. The importing of LNG will address pending shortages in gas supplies from the Cook Inlet basin. And on Jan. 15 John Sims, president of Enstar, talked to the Regulatory Commission of Alaska about the project.
"I cannot begin to describe what a significant milestone this was for Enstar and our team," Sims told the commission with reference to the Dec. 17 agreement.
Glenfarne is also working with the Alaska Gasline Development Corp. on a proposed gas pipeline from the North Slope, with an LNG export facility near Nikiski on the west side of the Kenai Peninsula. Sims emphasized to the RCA that the LNG import project is completely separate from the North Slope pipeline project. However, the import project does envisage the construction of an onshore LNG import facility adjacent the location proposed for the envisaged facility for the manufacture of LNG from pipelined North Slope gas -- use of the same location would simplify permitting for the LNG import project and could provide some long-term benefits for the state, Sims said.
An onshore import facility
Sims also commented that, although there have been discussions around the possibility of using a floating LNG import facility, Enstar and the other utilities have become concerned about a number of challenges that would arise in relation to this type of technology, including the need to deal with the strong tides in the Cook Inlet and with winter sea ice. Hence the plan to use an onshore facility.
At this point in the process Glenfarne and Enstar have agreed to work together over the next few months to develop a joint development agreement, with the objective of then working toward a final investment decision. Meanwhile, as this process moves ahead, the companies cannot communicate much detail about what is proposed, with confidentiality agreements in place for good reasons, Sims said.
Although the project with Glenfarne is an Enstar project, the gas utility is working actively with the other Railbelt utilities, to address the pending shortage in Cook Inlet gas supplies.
"We are doing this collaboratively with their input, feedback and a lot of really, really intense dialogue," Sims said.
An urgent situation
At the core of the decision to move forward with an LNG import project is the urgency of the situation, given the time needed to plan the project; obtain the necessary permits; design and build the import facility; and arrange plans and contracts for importing the LNG. All of that in the light of what appear to be inevitable gas shortages.
"Over the last 24 months, there is not a public analysis or presentation that was made that doesn't show that Cook Inlet is not going to meet the demands for long-term gas supplies for our customers," Sims told the commission.
In 2022 the utilities formed a working group to address the pending gas supply shortages, with Enstar subsequently hiring Berkeley Research Group to help assess the situation. The working group, approved as a regulated asset, assessed many options and evaluated a number of issues including the potential timeframe and scheduling risks involved, the potential cost of the gas and the reliability of the supply. The timing, the potential cost of the gas and the reliability of supply became the top priorities, Sims said.
"We don't have the opportunity to look at anything and everything that might be possible. We have to look at things that are real, and that is very, very important," he said.
Low exploration success rate
Sims also emphasized that, although there is as yet unproven and undeveloped natural gas in the Cook Inlet basin, the success rate for exploration wells in the basin is only 9%, a factor that must be considered when evaluating the potential for developing new gas resources in the basin.
"Where the exploration wells success rate comes into play for me is when I think about the risk of relying on the Cook Inlet over the long term," Sims said.
Hence, ultimately, the reason for moving ahead with the relationship between Glenfarne and Enstar.
Asked about the potential for obtaining gas from known but undeveloped gas fields, such as the Cosmopolitan field in Cook Inlet, Sims said that Enstar is only willing to consider gas where there are firm commitments to development.
"We're at a point in time today where we can't wait two years or three years for certain developments to happen," Sims said, referencing the pending gas shortages.
Recovering project costs
One issue that will need to be dealt with involves the costs incurred in moving forward with the project. Enstar will soon be submitting an RCA filing, asking for a new line item on its gas cost adjustment for the recovery of these costs, Sims said. There will also be a need to establish a mechanism for the utilities to fully recover the eventual tariff costs. Enstar will ask for an expedited timeframe for dealing with filings, with timely regulatory approvals being essential to enable the project to move forward, Sims commented.
The LNG importing facility will require a permit from the Federal Energy Regulatory Commission and, at this point, it is too early to say what environmental permitting may be required.
Each utility in different situation
Sims also commented that each of the Railbelt utilities is in a different situation with regard to future gas supplies. Enstar has contracts with Hilcorp Alaska and Furie Operating Alaska to meet its anticipated gas needs through to 2031, with Enstar supplying gas to Homer Electric Association during that time period, Sims said. Enstar has, however, indicated that it is still seeking firm gas supplies to reliably meet Homer Electric's needs in 2025 and 2026.
And so, to meet Enstar's needs, as the company sees the situation today, the utility would need to be importing gas into storage by a 2032 to 2033 timeframe, Sims said. But other utilities would need additional gas a couple of years before that -- Hilcorp's firm contracts with Chugach Electric Association and Matanuska Electric association expire in 2028, Sims said.
