Natural gas reserves in Cook Inlet being depleted, new state study warns; 2027 could be critical year unless exploration increases

Alaska’s Division of Oil and Gas has completed a new study of natural gas resources in Cook Inlet, in Southcentral Alaska, showing current reserves being depleted by 2027.

The report is raising concerns among state officials because half of the state’s population lives in communities in the region, including Anchorage, the state’s largest city, where gas is the sole source of fuel for space heating and a major fuel for power generation.

The report show that 870 billion cubic feet of gas remain in producing fields in Cook Inlet. At the present rate of consumption, about 70 billion cubic feet per year, that is enough to supply the region until 2027, unless new discoveries are made.

This has renewed discussion about potential imports of liquefied natural gas among regional utilities, the major customers for Cook Inlet gas. State legislators will be briefed on the study Monday afternoon, Jan. 30.

Alaska utilities are cautious in their assessment. “The DNR reserve report confirms what many of us have recognized for some time,” Chugach Electric Association CEO Arthur Miller said. “There is a gas shortfall from Cook Inlet coming soon, and utilities are investigating other sources of gas supply and evaluating clean energy options.

“The answer to Alaska’s long-term energy needs is multi-faceted; it includes a combination of gas from other sources as well as clean energy, including renewable power,” Miller said.

Lindsay Hobson, spokesperson for ENSTAR Natural Gas Co., the regional gas utility, agreed with Miller, at Chigach. “Based on our initial review, it is consistent with previous forecasts. The regional utilities have formed a working group on the issue and are examining different gas supply options from other regions of the state (the North Slope) and from outside Alaska, Hobson said.

ENSTAR has contracted with a third-party consulting group to evaluate alternative supply options, Hobson said, including liquefled natural gas. Results the work will be released later this year, she said.

Miller said Chugach Electric is pursuing renewable energy to reduce its dependence on gas The association has issued a Request for Proposals for renewable projects more than a year ago. “We are currently studying utility-scale wind and solar projects. Chugach is (also) in a unique position in that we receive more than 50 percent of our gas supply from our two-thirds working interest in the Beluga River gas field,” Miller said. This gives the utility control over much of its gas supply.

“Chugach is seeking long-term gas supply contracts, will increase drilling programs at the Beluga River Unit and is evaluating opportunities for additional gas supplies from the Cook Inlet region, the Alaska LNG project, the in-state Alaska pipeline, and other LNG supply options,” Miller said.

Mary Ann Pease, an independent energy consultant who has worked with local utilities on gas issues, thinks LNG should be pursued more aggressively. “Since 2009, the oil and gas division has released four studies evaluating Cook Inlet gas reserves and estimated recovery. Now here we are in 2023 and, basically, production continues to decline. Without investment, exploration and drilling the future for Cook Inlet gas does not look secure or stable to meet demand," Pease said.

"It’s time to look at other options such as Imported LNG,” she said.

LNG imports were considered in 2010 when there were earlier worries about reserve depletion but plans were shelved when Hilcorp, a major Texas independent, purchased mature gas fields in the Inlet from Chevron Corp. and Marathon Oil.

Hilcorp invested and rejuvenated the aging gas wells, increasing reserves and delaying the problem for a decade. Now, ten years later, Hilcorp itself is warning utility customers that it may not be able to renew current contracts in the next few years.

The new state study makes no assumptions of potential new discoveries and did not include discovered but undeveloped resources. One of these is a gas cap overlying a small oil reservoir at the Cosmopolitan field in the Inlet, which is owned by BlueCrest Energy, a Texas independent.

State geologists believe prospects for new discoveries are good – the Cook Inlet Basin is basically considered underexplored and gas-prone – but little new exploration is underway and industry interest appears limited.

A state oil and gas lease sale in mid-2022 brought only one bidder, Alaska independent HEX LLC, for one tract, and there was one bidder in a second state lease sale last year, Hilcorp Energy, bidding on four leases.

There were similar results in a nearby federal Outer Continental Shelf lease in late 2022, where there was only one bidder, Hilcorp Energy, for one tract. Interest in the region explorers has been declining for years, and there have been state and federal OCS sales where no bidders after the sale was advertised.

State officials are discussing new incentives to induce exploration, but the options appear limited. An ambitious program of state tax credits for new exploration that was ended in 2016 prompted exploration and some new discoveries but it was very costly for the state treasury and the Legislature appears to have little interest in renewing it.

Initiatives for renewable energy, particularly wind and hydro, are underway but renewable energy will only dent the supply problem for regional power generation unless a mega-project like the proposed large Susitna project is built. Also, renewable power generation is of limited help for regional space heating, although it would take pressure off remaining gas reserves.

There are also large “stranded” gas reserves on the North Slope, an estimated 35 trillion cubic feet, but an 800-mile pipeline is needed to bring this gas to south Alaska. The proposed large Alaska LNG Project, which has received government approvals, includes the pipeline as well as a large LNG export plant but its estimated $40 billion-plus cost is a key obstacle.