By Yereth Rosen
ANCHORAGE, Alaska, Dec 22 (Reuters) - The 28 operating natural gas fields in Alaska’s aged Cook Inlet basin hold an additional 1.142 trillion cubic feet of recoverable reserves, enough to meet regional demands for at least a decade, according to a new report issued by the Alaska Department of Natural Resources.
The study assumes that exports of liquefied natural gas from a plant owned by ConocoPhillips (COP.N) and Marathon (MRO.N) will cease in 2011, when the companies’ export license expired.
Kevin Banks, acting director of the department’s Division of Oil and Gas, said the report indicated that there will be sufficient reserves to keep that facility operating.
“If I were Conoco and Marathon, I’d be seriously thinking about extending the export license,” Banks said.
The LNG export plant, located in Kenai, has two customers, Tokyo Gas Co Ltd And Tokyo Electric Power Co Inc. The plant began operations in 1969 and is the nation’s only LNG export facility.
If the companies hope to continue their LNG exports, the state would likely try to extract promises of increased Cook Inlet exploration, Banks said.
“Any discussions that may surround more export of LNG would revolve around, What are you going to do, Conoco and Marathon, to replace the reserves that you are exporting?’”
The state study concludes that 20 percent of Cook Inlet’s original natural gas capacity remains to be produced.
“The most accessible gas has been produced, and while the basin is not in imminent danger of running out, the remaining gas may carry increased cost,” state Natural Resources Commissioner Tom Irwin said in a statement.
Most of the remaining natural gas is in four fields, the study said. They are the ConocoPhillips-operated Beluga River and North Cook Inlet fields, the Marathon-operated Ninilchik field and the Chevron (CVX.N)-operated McArthur River/Grayling gas sands field.
The study did not evaluate remaining reserves in the Marathon-operated Kenai Gas Field because that unit is located on federal territory in the Kenai Peninsula.
Commercial oil and gas production in the Cook Inlet basin began in the 1950s and, according to some historians, was a major impetus for Alaska statehood. But Cook Inlet activities have been eclipsed for decades by the much-larger oil production of the North Slope.
Cook Inlet natural gas production peaked in the 1990s at about 220 billion cubic feet a year. Current production is about 140 billion cubic feet a year, according to the department report, and is used by regional utilities as well as the LNG export plant. Production is expected to continue to decline in future years.
The U.S. Geological Survey, with assistance from Alaska agencies, is currently conducting a new study of potential natural gas reserves yet to be discovered, Banks said.
Cook Inlet-area exploration is challenged economically by a variety of factors, including market isolation, lack of economies of scale and highly variable seasonal demand.
Banks said successful exploration in the future might focus on areas offshore, within the Kenai National Wildlife Refuge and within private property all sites where drilling is complicated and controversial.
“The exploration potential will depend, to some large extent, on being able to access the reserves,” he said. (Editing by Christian Wiessner)