March 18, 2011 / 6:31 PM / 9 years ago

Exclusive: Japan crisis may spur demand for Alaska LNG

PRUDHOE BAY, Alaska (Reuters) - Japan’s nuclear crisis may lead to greater demand for Alaskan liquefied natural gas, Alaska’s lieutenant governor told Reuters on Friday.

Mead Treadwell said Alaska was standing by to help Japan in the short-term. But, he said, the nuclear disaster could have longer-term implications for Alaska’s oil and gas industry if Japan backs away from nuclear power.

ConocoPhillips said last month that it planned to shut its 40-year-old Kenai liquefied natural gas plant in Alaska in the coming months after it failed to sign new supply contracts with long-standing Japanese buyers.

ConocoPhillips and partner Marathon Oil had been granted an export license extension last year, from 2011 to 2013. But with ample supply elsewhere in the Pacific, Kenai’s customers saw no need to extend contracts that run out in March.

“To the extent that oil and natural gas ends up replacing any nuclear power, Alaska may be a supplier,” Treadwell said a in telephone interview.

ConocoPhillips said it had decided to close the 1.3 million tonne plant, which has been supplying LNG to Asia since 1969, because there was a great deal of LNG supply in Asia.

Treadwell said the nuclear crisis in Japan could result in greater demand for LNG from the plant, which was due to be mothballed in April or May.

LNG demand in Asia rocketed last year as major importers Japan and Korea recovered from recession.

The demand was met mainly by LNG production increases in Asia and the Middle East, which kept the market well supplied in 2010. But current turmoil in the Middle East and the Japanese situation could spur changes in LNG supplies.

Reporting by Andrea Shalal-Esa; Editing by Toni Reinhold

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