its Aug. 8 earnings call liquefied natural gas company Excelerate Energy Inc. announced that it is in advanced discussions with Southcentral Alaska utilities for the development of a floating LNG import terminal for use in the Cook Inlet. The Southcentral utilities are considering the import of LNG as a means of addressing potential shortages of Cook Inlet gas supplies, starting in 2027. Southcentral depends on Cook Inlet gas for power generation and for heating buildings.
The presentation referenced the potential location of the terminal as being in the lower Cook Inlet. Presumably the terminal would need to be placed at a convenient location for access to the existing gas transmission pipeline system -- there is a gas transmission pipeline that passes down the west side of the Kenai Peninsula. However, there are other possible locations for an LNG terminal.
Excelerate, formed in 2003, is based in The Woodlands, Texas. The company has 11 FSRUs, floating storage regasification units, in operation or under construction, it said on its website.
In describing its development plans for Cook Inlet in its earnings call presentation, Excelerate said it expects to own the FSRU-based LNG terminal, supply the LNG and sell gas to the local utilities with gas sales agreements which would include "an infrastructure payment component as a take-or-pay obligation."
As previously reported by Petroleum News, the Regulatory Commission of Alaska recently approved an application by Enstar Natural Gas Co.'s pipeline affiliate for an extension to its service area, to allow the construction of a gas pipeline from Port Mackenzie near the mouth of the Knik Arm. The pipeline would connect with a potential floating LNG import facility at the port, adjacent to upper Cook Inlet.
Timing constraints
A key factor in finding ways to address the pending gas shortfall is the speed at which alternative energy solutions can be brought into play -- any new energy source along the Railbelt will involve planning, design, construction and permitting. Excelerate says that it is targeting the start of commercial operations for its LNG terminal in 2028.
And currently there is no immediate alternative to natural gas for heating buildings in Southcentral Alaska. The use of electrically powered heat pumps is presumably a future possibility, but the conversion of buildings to this technology would likely be expensive and would need to be supported by adequate and reliable electricity supplies.
A recent study by the National Renewable Energy Laboratory indicated the possibility of 74% of the Railbelt power generation coming from renewable energy sources, in particular wind power, by 2040. However, the report assumed that a planned second electricity transmission line from the Kenai Peninsula and load centers in the Anchorage region would be built -- initial work on this possibility is underway, with funding support from the federal government coupled with some initial matching state funding. Current limitations in the transmission interties between the southern, central and northern sectors of the Railbelt electrical system are seen as impediments to the development of large-scale renewable energy systems.
Anchorage based Chugach Electric has been evaluating two proposed industrial scale renewable energy projects, a wind farm and a solar farm.
Three projects by potential independent power producers are in progress, to investigate and possibly develop power generation systems that would use the major tidal currents in the Cook Inlet and Turnagain Arm. However, at this stage there is uncertainty over the feasibility, potential scale and development timing of these tidal systems.
Increased hydropower is also a possibility, although large hydropower systems tend to involve lengthy timeframes for design, permitting and construction. There is a project currently underway to potentially expand the Bradley Lake hydropower system in the southern Kenai Peninsula.
A gas pipeline?
Theoretically gas could be shipped from the North Slope to Southcentral Alaska via a gas pipeline. However, the cost of building such a pipeline, purely for Southcentral use, would presumably be a major barrier. Plans for developing a major gas pipeline to Southcentral for the export of LNG have been under discussion and evaluation for many years without, thus far, coming to fruition.
Another possibility that has been discussed is the development of coal-fired power generation, using known coal resources in Southcentral. However, the desire for clean energy sources would drive a need to capture and sequester the carbon emissions from the power station, using subsurface geologic reservoirs and an associated exhaust pipeline system.
A likely need for LNG
It seems that none of the possible options would reliably eliminate the need to import LNG in the near future, in the absence of some very rapid new Cook Inlet gas field development. Even the NREL report, expressing optimism about the future use of renewables in the Railbelt, assumed that there would still be some need to import liquefied natural gas around 2028 and 2029, to bolster gas supplies, given the time taken to develop the necessary renewable systems.
