Mobile Edition
Print
Get the Mag
Weekly UpdatesGiven the lack of development of alternative natural gas supplies in the Interior and the dwindling supply of Cook Inlet gas causing availability issues and price increases, Fairbanks Natural Gas is eyeing vast supplies of North Slope gas as its future feedstock.
The Fairbanks-based gas supplier, which currently buys Cook Inlet gas and trucks it north to the Interior for use by its 900-plus customer base, is making plans to develop a liquefied natural gas facility on the North Slope.
"We will build a new facility to tap the abundant long-term gas supply and begin trucking the supply from the North Slope rather than Cook Inlet," said Dan Britton, president of Fairbanks Natural Gas.
In late October, the company was working to finalize a lease for property at Deadhorse and to negotiate a supply contract with North Slope gas owners. Fairbanks Natural Gas applied this fall to governmental regulators for permits to construct a facility, with the goal of construction taking place in the summer of 2007.
"We have the potential for gas shipments to begin in the fall of 2007," Britton said. "It's an aggressive schedule."
UP TO $10 MILLION INVESTMENT
Estimated cost for construction of a new LNG facility on the North Slope ranges from $6 million to $10 million, he said. The company is still in the engineering phase of the project.
Once completed, the North Slope facility will add 140 miles each way for the specialized tanker trucks that currently carry LNG from the north side of Cook Inlet, at Point MacKenzie, to Fairbanks, a 350-mile trip.
Trucking LNG down the Dalton Highway--a mostly gravel, industrial route with significant driving and road hazards-will be more expensive and add to maintenance costs for the tanker trucks, Britton said. But those increased transportation costs and escalating gas feedstock prices will likely be offset by savings in North Slope gas prices, compared to the ever-increasing Cook Inlet gas costs, he said.
"We also do achieve better efficiencies (for LNG production) because of the ambient temperature on the North Slope," Britton added.
CONTRACT WITH PRODUCERS IN NEGOTIATION
How it will all pencil out remains to be seen, as the company is still negotiating a gas supply contract with North Slope producers.
The need for an alternative supply became crystal clear to Fairbanks Natural Gas earlier this year as the company's past supplier, Aurora Gas LLC, gave the Fairbanks-based company about a month's notice that it would stop providing Cook Inlet gas.
The contract with Aurora had called for gas supplies through March of 2007, Britton said.
Fairbanks Natural Gas sought gas contracts with other Cook Inlet producers and suppliers, but could not obtain firm commitments from gas producers, he said. So the company signed an 18-month agreement with Enstar Natural Gas Co., the largest gas distributor, which treats Fairbanks Natural Gas as a commercial-rate customer.
The contract with Enstar was approved by State utility regulators at the end of September, two days before Aurora stopped deliveries. "Our customers did not see any shortages of gas," Britton said. "We felt confident we would get something worked out."
CHEAPER THAN OIL
Buying gas from Enstar means a 30 percent increase in feedstock costs for the remainder of 2006, and a 90 percent increase for 2007, Britton said. So far, Fairbanks Natural Gas is holding its rates steady to customers and is evaluating the company's financial plan for 2007. "We have not made any final decisions on rates for 2007. We're looking at trying to keep our rates down to our customers as much as possible, but it probably will have an impact to rates," Britton said.
He noted that gas customers have saved as much as 30 percent in recent years, compared to heating costs based on oil usage. "We're providing an alternative that has been cheaper than oil, and it's cleaner and more environmentally sensitive," he said.
HEATING FAIRBANKS
Fairbanks Natural Gas currently supplies more than 900 customers in the Fairbanks area, a network that has grown annually since the company first started in 1997 with a small network in the southern industrial part of Fairbanks.
The company has expanded its pipe network to many areas of Fairbanks and provides heat to some of the city's largest commercial entities, including Home Depot, Wal-Mart, Pike's Landing, Hotel and Cabins and the Princess Fairbanks Hotel.
A subsidiary of Pentex Alaska, which is a tightly held group of shareholders, Fairbanks Natural Gas is still in the development stage, Britton said. Capital funding for annual expansions and for the planned LNG plant will come mostly from shareholders, he said.
"We have been investing significant capital in expanding our distribution system and building new storage facilities," Britton said. "At this point, we're not turning a profit because we're building a long-term system to the benefit of the Fairbanks community."
FEED