Alaska LNG plant to close after 40 years

Warren R. True
Chief Technology Editor-LNG/Gas Processing

HOUSTON, Feb. 10 -- North America’s only LNG production plant, at Nikiski, Alas., on the Kenai Peninsula will be closed after more than 40 years of operation, according to owners ConocoPhillips and Marathon Oil Corp. The announcement cited “market changes.”

Dan Clark, manager of Cook Inlet assets for ConocoPhillips Alaska, told the Associated Press the company could not secure the sales and supply agreements necessary to keep operating plant beyond April or May.

Clark told AP it would take months to mothball the plant, which ConocoPhillips co-owns with Marathon but operates solely. Clark said the companies decided independently that the plant should be closed, citing a "general deterioration" in the LNG market and the volume of gas at the plant.

Exports from the plant began in 1969 with all shipments going to Japan. At its peak, Clark said, about 64 billion cu m/year were exported, but volumes had been falling. Clark couldn't specify the most recent volumes but said that, during 2010, the company employed only one LNG carrier instead of the two used previously.

For years, the plant has exported Alaska gas that was surplus to needs of the Cook Inlet area. As local demand has increased, sources for LNG into Japan, the world’s largest importer of LNG, have also increased and become more varied. In recent years, the country has secured much of its supply from new developments off Western Australia and from Qatar.

Until last year, the Alaskan plant was the Americas’ only LNG exporting plant. That changed with start-up in October of the $3.8 billion, 4.4 million tpy Peru LNG plant (OGJ, Oct. 10. 2010, Newsletter).

Also, and with not a little irony, the announcement of the Kenai plant closing exactly coincided with another announcement, from Canada’s National Energy Board, that it would hold hearings next month on an application to build a new LNG plant in North America at Kitimat, BC.

KM-LNG Operating General Partnership wants a 20-year license to export natural gas as LNG. Most of that gas will come from shale reserves in northeast British Columbia.

Contact Warren R. True at warrent@ogjonline.com.



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