Natural gas in Southcentral Alaska may be running down

When you turn your gas stove on you expect it to light, right?

When the light switch in flipped, the lights come on?

Alaskans may be too complacent about everyday things, however.

A sobering thought is that Cook Inlet’s natural gas fields in Southcentral Alaska are declining.

These gas wells have heated homes and buildings and provided electricity for decades.

Hilcorp Energy, the major gas producer in the region, is still drilling new gas wells there has been a steady decline in gas production over recent years.

All this is important because gas provides the bulk of the heat and electricity for Southcentral communities where half of the state’s population lives. The regional utilities and state officials are in discussions on the decline and formed a working group after Hilcorp Energy, the major gas producer, warned of the problem. Talks are still at a preliminary level. No overall solutions seen as yet.

Hilcorp is indeed drilling and finding new gas mainly near its existing field at Ninikchik, on the Kenai Peninsula, but the supply additions are incremental and not enough to reverse the oberall trend. Regional utilities are also adopting power use management systems that result in in more efficient use of the fuel, translating to less use of gas.

Matanuska Electric Association, or MEA said it expects a small reduction of gas use this year due to the increased efficiencies, while also still supporting community growth in communities.

MEA said its gas demand for natural gas is expected to drop from 5.9 billion cubic feet last year to between 5.6 billion and 5.7 billion cubic feet this year.

The reduced gas need is a result of efficiency gained through the new “power pooling” agreement in place with Chugach Electric Assoc. where demand is coordinated among power plants, with load shifted to the most efficient plants operating at the time.

However, in the big picture the numbers don’t look good: In 2005 Cook Inlet was producing over 200 billion cubic feet (bcf) of gas yearly. That had dropped to 102 bcf in 2015; 83 bcf in 2018; 78.4 bcf in 2020 and 76.8 bcf in 2021. The gas fields were aging and rapid drop from 2012 to 2016 were major factors in the loss of major gas-related manufacturing plants on the Kenai Peninsula that made fertilizer and ammonia as well as liquefied natural gas, or LNG, for export.

Since 2016 regional electric and gas utilities have been the major customers for gas producers, mainly Hilcorp, but the continued decline is now raising concerns over the future supply of energy.

In 2010 there was a similar worry about gas supply. The Municipality of Anchorage was seriously concerned about gas for power generation and space heating during winter cold snaps, and plans for rolling power “brown outs,” with mandatory reductions in use of electricity to preserve natural gas.

Imports of liquefied natural gas, or LNG, were being investigated as a solution.

Hilcorp Energy’s arrival in Cook Inlet in 2012 postponed the problem. Hilcorp invested in refurbishing and repairing old wells and finding some new gas. However,community and business growth led to more gas demand.That is continuing.

Meanwhile, an approximate $40 billion North Slope gas pipeline, once seen as the ultimate solution by tapping large gas reserves on the slope, seems indefinitely on hold.

There is more gas known in Cook Inlet, for example adjacent to the Cosmopolitan oil field near Anchor Point, offshore the Kenai Peninsula. There are also undeveloped resources in the small Kitchen Lights field, also offshore in the Inlet. The cost of developing this gas is unknown.

There are, as yet, no big new discoveries and no major new exploration efforts, at least based on lackluster results in a state Cook Inlet lease sale held last spring.

Here are the major components of natural gas demand today:

Enstar Natural Gas says it typically requires 33 bsf billion per year; Chugach Electric needs about 8 billion cubic feet,and MEA requires about 5.7 cubic feet. There appears be enough gas to meet these needs for the near and perhaps medium term.

But new buyers are knocking on the door. Donlin Gold, a potential large gold mine west of Anchorage, could be a major new user with a need of 15 billion cubic feet to 18 billion cubic feet per year.

Another potential mining company that will want gas is Nova Minerals, which is exploring a major gold deposit near Skwentna in the western Mat-Su region. This mine, if built, would be near the proposed route of a gas pipeline from Cook Inlet to the Donlin Gold project. Nova Minerals wants to tap into the gas line to Donlin Gold.

Gas sales to private firms are typically negotiated and not regulated, so mining firms could offer premium prices to gas producers. That could encourage more gas exploration but it could also bid up the cost of gas to the regional utilities, and consumers.

Meanwhile, more demand for gas and power generated from gas may be coming from the state’s Interior. Golden Valley Electric Association, the Fairbanks-based cooperative for the Interior, plans to close one its two coal-fired power plants and will purchase more electricity from Southcentral Alaska that is generated with natural has and sent north over an electric intertie.

Fairbanks Natural Gas, or FNG, a small gas utility that serves Fairbanks with LNG trucked from Southcentral, is expanding its customer has and will need more liquefied gas. FNG is already importing small quantities of LNG from British Columbia to supplement its LNG trucked from Cook Inlet. That could be expanded.

Unless there are major new gas discoveries or construction of a North Slope piepeline, the idea of LNG imports may be resurrected. That will grate on many Alaskans.