ConocoPhillips will not apply for new LNG export license; plant to stay in stand-by mode

ConocoPhillips Alaska Inc. says it will not extend the federal export license for its Kenai natural gas liquefaction plant when the license expires March 31.

However, the plant will be maintained in a stand-by mode to be available if opportunities develop, company spokeswoman Amy Burnett said in a statement issued March 4.

“The plant is currently operational, in a stand-by mode, maximizing our flexibility as we determine the long-term future of the facility,” Burnett said. “ConocoPhillips will consider pursuing a new export authorization only if local gas needs are met and there is sufficient gas for export.

“Right now, we are unaware of sufficient gas supply to support exports. We still have the flexibility to resume operations and apply for a new export authorization if gas becomes available. Plans will depend primarily on gas availability, local gas needs, various regulatory decisions and market conditions.”

The Alaska plant is the only U.S. LNG plant that has exported gas from North America. It was built in 1969 by Phillips Petroleum and Marathon Oil as a way to market surplus gas. Tokyo Gas and Tokyo Electric were the prime customers for four decades.

As Cook Inlet gas supplies declined in recent years, exports became problematic, however. The company had applied for, and received, several extensions of its federal export license over the years, the latest being a two-year extension to 2013.

The U.S. Department of Energy requires that gas supplies be sufficient to meet domestic, in this case regional, energy needs, and because utilities in Southcentral Alaska are now short of gas it is unlikely that DOE would grant the license extension even if it were applied for.

ConocoPhillips had planned to close the facility in 2011, but kept it operating to send some additional shipments of LNG to Japan after the nation’s nuclear power generation capacity was sharply reduced.

With the plant in a maintenance mode, some level of staffing will still be needed, Burnett said.

“We are currently evaluating the staffing requirements. We plan to work with any employees who might be affected by idling the plant to provide other job opportunities within the company,” she said.

Tim Bradner is a reporter for the Alaska Journal of Commerce.