UPDATE 1-Conoco, Marathon to shut Alaska LNG export plant

Thu Feb 10, 2011 10:38am EST

* Domestic supply, Asia market changes, behind decision

* Kenai supplied about 2 cargoes a month to Japan in 2010

NEW YORK Feb 10 (Reuters) - Marathon Oil (MRO.N) and ConocoPhillips (COP.N) plan to shut the Kenai liquefied natural gas plant in Alaska as depleting domestic resources and market changes in Asia make exports inviable, Marathon said on Thursday.

Conoco and Marathon have a license to export LNG from the small-scale plant to Asia until 2013, under an extension granted last year, but dwindling gas supply to the plant has led to the decision to shut the plant.

"The business case did not make it feasible to continue LNG exports," a Marathon spokeswoman said, adding that drilling activity in the Cook Inlet, which supplies gas to Kenai, has not offset decline rates.

"The decision to cease exports will enable us to continue to meet our contractual obligations to supply gas to the region."

The spokeswoman declined to give a timeline for the closure.

Local media reported late Wednesday that ample supply of LNG in Asia was also a factor in the decision to shut Kenai. The Marathon spokeswoman declined to comment on this.

The Kenai plant is operated by ConocoPhillips, which owns 70 percent with Marathon owning the remaining 30 percent.

Last year, the plant exported two cargoes a month to Japanese utilities Tokyo Electric Power Co (9501.T) and Tokyo Gas Co (9531.T). (Reporting by Edward McAllister; Editing by Marguerita Choy)

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