Liquid natural gas plant agreement ensures adequate supplies for Alaska
ANCHORAGE - Energy companies ConocoPhillips and Marathon Oil Corp. reached an agreement with the state ensuring there will be adequate supplies of natural gas for years to come in Southcentral Alaska, Gov. Sarah Palin announced Thursday.
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Palin said the agreement will benefit the state and its residents in several ways. Not only does it secure local needs but it also requires that ConocoPhillips and Marathon - the companies that have 70/30 ownership in the liquid natural gas plant on the Kenai Peninsula - develop additional natural gas reserves in Cook Inlet.
In return, the state is supporting a two-year extension of the federal export license for the Nikiski plant. The plant converts about 150 to 200 million cubic feet of gas into liquid natural gas each day. All of it is sold to Japan. It is the only liquid natural gas export plant in North America.
The agreement also allows third parties the opportunity to use the plant to process their gas. The companies also have agreed to sell valuable seismic and well data to other companies looking to develop Cook Inlet's large gas reserves.
The U.S. Department of Energy must still approve the export license. It would be effective through March 2011. The current export license expires in 2009.
The liquid natural gas plant, operational since 1969 and employing 58 people, contributes about $50 million in royalties and taxes to state and local economies.
Jim Bowles, president of ConocoPhillips Alaska Inc., said the agreement amounts to a new level of cooperation between the companies and the state. ConocoPhillips, Alaska's largest oil and gas producer, is one of the companies that has submitted a proposal to build a natural gas pipeline from the North Slope at a cost of up to $32 billion.
However, ConocoPhillips calls its bid an "alternative" proposal for a 1,700-mile pipeline down the Alaska Highway into Canada since it doesn't meet all the state's bid requirements. The company targets 2018 for pipeline startup.
The proposal is competing against five applications under the Alaska Gasline Inducement Act, a new law that offers the winner an exclusive state license plus a package of financial incentives to try to spur construction of a gas pipeline.
Palin has said a winner will be selected from qualifying AGIA applications.
One of the bid requirements is providing natural gas to the state's residents.
Bowles said the liquid natural gas agreement with the state will help meet the area's gas needs until a pipeline can be built. ConocoPhillips has agreed to drill two new wells in Cook Inlet in 2008. Marathon will drill at least five.