Enstar tells regulators it will have plan to import LNG by year end

No one is happy about this, the least being Enstar Natural Gas Co., the gas distribution company for Southcentral Alaska.

Enstar has told state regulators that it intends to have a contract in place to purchase liquefied natural gas by the end of the year. The statement came at the end of a letter sent to the Regulatory Commission of Alaska on July 15.

The LNG would be imported from out of state, and it will be expensive. Enstar’s Alaska president, John Sims, has said the LNG cost could be double that for the gas now produced from Cook Inlet. But that gas supply will dwindle soon.

The July 15 letter from Enstar to the RCA ended several months of silence by Enstar and other Southcentral utilities over contingency plans to deal with a shortfall in natural gas supplies from Cook Inlet that will begin in 2026.

Enstar and the two electric cooperatives serving Southcentral, Matanuska Electric Association in Mat-Su and Chugach Electric Association in Anchorage, are required by the Regulatory Commission of Alaska to show they are capable of supplying consumers’ energy needs. That’s without regard to where the energy comes from.

A resource study by the state Division of Oil and Gas predicts the shortfall beginning in 2027 and worsening through 2030 and beyond, but Enstar also said it is short 2 billion cubic feet of contracted gas supply a year earlier, in 2026. Enstar purchases about 38 billion cubic feet of gas yearly, about half of what is produced in Cook Inlet.

Political and community leaders have been critical of discussions of imported LNG because it is thought that Cook Inlet holds undiscovered gas and there is also very large gas reserves on the North Slope.

But while Cook Inlet has potential, costs are still high and there are uncertainties as to whether any new gas will be economically viable, at least in the quantities needed. As for the North Slope, a gas pipeline that will cost several billion dollars is needed.

Enstar is in a difficult position on this because there is no easy alternative for the natural gas it supplies for space heating, although all-electric heat is possible, though it is expensive.

Chugach Electric Association and Matanuska Electric Association which supply most of the electricity used in Mat-Su and Anchorage, have alternatives like hydro, solar and wind. Both are considering new wind and solar projects that will reduce their need for natural gas, but no decisions have been made.

Chugach owns part of the Beluga gas field and is at least temporarily shielded from declining gas from other Cook Inlet fields. MEA’s Ekutna power plant is mainly fueled by gas but can also burn oil if needed.

The Alaska Energy Authority, the state energy agency, is considering a plan to increase power from the Bradley Lake hydro project near Homer, which AEA owns. The authority is considering the Dixon Diversion project, which would tap water near Bradley Lake and increase its power output.

This would add new power and also reduce natural gas use but it cannot be built until 2030.

Enstar’s notification to the RCA gave no details of where the company might get its LNG but sources familiar with the regional energy picture say there are two possible sources. One is from Canada with delivery in small containers, which will be very expensive. A second option is by a larger LNG tanker that could bring liquiefied gas from the west coast of Mexico.

The Mexico option, done through California-based Sempra Energy, would be able to deliver larger volumes of LNG at less cost. But it would also require a Cook Inlet unloading terminal, an LNG storage tank and facilities to “regasify” the LNG into a gas that could flow through Entar’s gas distribution lines and also serve the electric utilities.

One option Enstar is considering for an unloading facility is at Port MacKenzie. LNG shipped by vessels could be delivered to the Mat-Su port with a pipeline conection built to an Enstar’s gas pipeline.

The other option is using the mothballed ConocoPhillips LNG export plant at Nikiski. This plant was built to make LNG from Cook Inlet gas and export it. It operated from 1969 to about 2015 and was then shut down mainly because the Cook Inlet gas fields lacked the reserves to supply both the regional needs and export markets.

Some of the facilities at the Nikiski plant could be used in an LNG import plan, such as the large LNG storage tank, docks and other equipment. New investment would still be required, however, for regasification units and upgrades of the storage tank.

Facilities would also need to be built at Port MacKenzie, as an alternative.

Marathon Petroleum owns the closed Nikiski plant but has been trying to sell it, according to industry sources.