FAIRBANKS, Alaska (KTVF) – Interior Gas Utility (IGU), which provides natural gas as a heating source to thousands of homes and businesses throughout the Interior, intends to shift its supply of Liquefied Natural Gas (LNG) from Cook Inlet to the North Slope.
In Interior Alaska, 2,750 houses and businesses rely on IGU’s natural gas for heating, with 30 to 40 new customers added each month during the winter and 100 each month during construction.
This gas is now obtained from the Cook Inlet and will be so through 2024. IGU General Manager Elena Sudduth stated, “We have a liquefaction plant there in Point MacKenzie that is capable of producing up to 50 thousand gallons of LNG per day.”
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Once liquefied, the gas is loaded into customized trailers and driven to Interior Alaska, where it is stored.
A considerable amount is held in a number of storage facilities in Fairbanks and North Pole until it is ready to be distributed around the area to heat houses and buildings. “We have a storage capacity of five and a half million gallons, and when you compare that during the worst cold snap that we’ve had this year, we have sent out 110,000 gallons, so total capacity: five and a half million, biggest two-day send out: 110,000,” Sudduth said.
This means that, depending on how much natural gas consumers use, the available storage can protect the Interior from supply problems, Sudduth explained. “By our statute, we will never go under five days of storage, but that is really not representative of anything because most of the time we have at least 30.”
However, an expanding consumer base prompted a significant conclusion in 2021. “We realized that soon enough, as soon as this year, our production capacity at the Cook Inlet would be lower than what we needed to produce in order to be able to serve all of our customers,” he stated.
As plans for expanding capacity at the South Central Alaska site began, the utility discovered that extractor Hilcorp would not guarantee the renewal of present contracts in the area. As a consequence, Sudduth noted, “We were rather hesitant to make a 60 million dollar investment into an asset that might become unusable come a few years later.”
A hunt for solutions began, which ultimately led to the North Slope and a partnership with Harvest Alaska, LLC. “They are currently constructing a liquefaction plant on the North Slope near Deadhorse.” That liquefaction facility is scheduled to go online very soon. The projected start date is October 2024, and when it is operational, we will source all of our liquefied natural gas from there rather than the Cook Inlet,” she explained.
At that point, Hilcorp and IGU’s contract commitments will expire, as agreed upon by both parties. “What that means is that IGU would be relieved of its minimum volume commitments from the Cook Inlet, and Hilcorp will be relieved of the obligation to sell us any natural gas in the Cook Inlet as soon as we move to the North Slope,” Sudduth said in a press release.
At that time, IGU will continue to work with Hilcorp, which also extracts natural gas on the North Slope.
Natural gas is brought to the surface as a byproduct of the oil extraction process. If the gas is not intended for sale, it is reinjected into the ground.
According to Sudduth, 8.9 billion cubic feet of natural gas are currently reinjected on the North Slope each day. This year. Interior Gas Utility will need 1.3 billion cubic feet. So they re-inject nearly eight times as much as we require in a single year on the North Slope.”
According to Sudduth, this agreement marks the first time natural gas from the North Slope will be used in Alaska. “It is going to mimic what we currently have in the Cook Inlet whereby the gas comes through a very short pipeline to the liquefaction facility, and then we liquefy the natural gas by freezing it to -265 degrees Fahrenheit.”
According to Sudduth, the more compressed LNG will be put onto trucks and carried to the Interior via the Dalton Highway.
When asked what this will mean for pricing, she responded, “There is a lot that goes into IGU pricing, to include the cost of gas, of course, but there are other influencers, and so natural gas cost has been relatively stable over the years.”