Friday, November 23, 2012

XTO runs short of fuel gas; utilities plan for tight gas supplies

—Alan Bailey

In a situation that presumably reflects the ever tightening gas supply situation in Alaska’s Cook Inlet basin, ExxonMobil subsidiary XTO Energy had to suspend oil production at its two Middle Ground Shoal platforms in the inlet because of a shortage of natural gas, an XTO spokesman told Petroleum News in a Nov. 15 email.

“The suspension is due to a temporary supply shortage of natural gas needed to power the platforms,” he said. “XTO should shortly have both platforms fully operational.”

At the time of going to press XTO had not provided an update on the situation.

Tightening supplies

As production declines from the aging gas fields of the Cook Inlet basin, gas and power utilities in Southcentral Alaska have been alerting people to the tightening gas supply situation and warning of a pending utility gas shortage in a couple of years’ time.

In September Jim Posey, general manager of Municipal Light & Power, told the Anchorage Mayor’s Energy Task Force that earlier in the year his utility had needed to withdraw some gas from Cook Inlet Natural Gas Storage Alaska’s new Kenai Peninsula gas storage facility following a compressor failure at the Beluga gas field.

“That’s how close we are,” Posey said.

There is new oil and gas exploration and development taking place in the basin, primarily by independent companies attracted to the basin by, among other factors, state tax credits for Cook Inlet exploration. But research commissioned by the utilities has found that no new gas discoveries of sufficient size are likely to come on line quickly enough to fill the initial supply gap; development drilling in existing fields is unlikely to happen fast enough to sufficiently stem the production decline; and there is no practical possibility of constructing a gas pipeline from the North Slope into Southcentral before gas supplies from the Cook Inlet are likely to fall short of local gas demand.

Imports planned

The utilities are planning to import either liquefied natural gas or compressed natural gas to cover the gas supply shortfall, at least until sufficient in-state gas supplies can be brought on line.

On Nov. 19 Colleen Starring, president of Enstar Natural Gas Co., told the Anchorage Chamber of Commerce that Enstar, the main Southcentral gas utility, is already facing a shortfall in firm gas supplies committed under contract, with that shortfall set to grow continuously over the coming years.

“What we’re short right now, going into this winter, is about 4 billion or 4.5 billion cubic feet of (guaranteed) gas,” Starring said.

Enstar does anticipate sufficient gas being available, although not under firm contract, through the coming winter — the utility expects to fill the gap in guaranteed supplies using a daily bidding system, a kind of spot market that it started operating in early 2011.

Starring emphasized the importance of the Cook Inlet Natural Gas Storage Alaska facility in enabling the adequate delivery of gas during high utility gas demand in the winter. The facility, known as CINGSA, made its first winter gas withdrawals on Nov. 9, having been warehousing gas over the summer for winter use, Starring said.

But based on current supply and demand forecasts the utilities foresee having to import at least some gas in the winter of 2014 to 2015, she said.

Assessing options

The utilities have seen presentations from five entities about possible gas import arrangements and have commissioned consultancy firm Northern Economics to assess the relative merits of liquefied natural gas and compressed natural gas for the imports, with the utilities wanting to make a decision in early 2013 on an import option.

The utilities have considered the possibility of trucking liquefied natural gas from the North Slope but have viewed this option as impractical for Southcentral Alaska, Starring said.

“The engineering, the infrastructure and the permitting challenges, and just the scalability of it to meet the demands that we see occurring in Southcentral, are not going to synch up,” Starring said.

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