This Feb. 2, 2008 file photo shows the ConocoPhillips LNG facility in Nikiski. (Clarion file photo)

This Feb. 2, 2008 file photo shows the ConocoPhillips LNG facility in Nikiski. (Clarion file photo)

ConocoPhillips to mothball LNG facility

  • By Rashah McChesney
  • Wednesday, July 12, 2017 7:44pm
  • News

JUNEAU — In 2016, ConocoPhillips announced that it was putting its liquefied natural gas plant in Kenai on the market.

But, the company hasn’t yet found a buyer and a company spokesperson said it’s going to save expenses by mothballing the facility this fall.

The facility — under various owners — has been liquefying Cook Inlet gas for sale to overseas markets for nearly 50 years. It is the last piece of infrastructure that ConocoPhillips owns in Cook Inlet.

ADVERTISEMENT
0 seconds of 0 secondsVolume 0%
Press shift question mark to access a list of keyboard shortcuts
00:00
00:00
00:00
 

The Kenai LNG facility is competing with a world market that is awash in natural gas.

“Most people are fairly aware of the fact that worldwide the price of oil and gas has been low,” said ConocoPhillips Senior Communications Specialist Amy Burnett.

ConocoPhillips has been doing relatively well in the oil business in Alaska. The company reported earning $99 million in the first quarter of 2017. And, earlier this year, it announced a new oil discovery in Prudhoe Bay that could yield up to 100,000 barrels of oil a day.

But, it has struggled to make money in the LNG export market.

“Over the last few years, more facilities have come online to export LNG,” Burnett said. “So there are more sources available for the product which makes competition more difficult.”

And the plant has been on hold for awhile.

“Our last export … was in the fall of 2015 and since that time the plant has been in a cold shutdown mode,” she said.

That cold shutdown mode means the plant isn’t exporting any LNG, but could restart shipments relatively quickly.

However, ConocoPhillips wasn’t producing gas nearby like it used to. It sold its natural gas production facilities in Cook Inlet in 2016, so it is buying a lot of the gas it needs to maintain cold tanks.

Letting those tanks warm up means that ConocoPhillips will save some money. But it also means that it will take longer to bring the plant back online — and cost more.

It also means that some people may lose their jobs.

“It’s too soon to say actually what that’s going to look like. There are about 18 ConocoPhillips employees who may be impacted by the change,” Burnett said.

That is just over half of the contractors and ConocoPhillips employees that Burnett said are currently working at the Kenai LNG facility.

Larry Persily, oil and gas adviser for the Kenai Peninsula Borough, said if the company does scale back its operations it will have an impact beyond the potential loss of 18 jobs in the Peninsula communities.

“It’s also a hard reminder to Alaskans that no matter how much we want to sell our oil and gas, if the market doesn’t want it, doesn’t need it or isn’t willing to pay a price to make it profitable — we can’t sell our oil and gas,” Persily said.

Over the last three years, prices have tumbled from $15-$18 per million btu, to just over $5.

“You can’t buy gas out of Cook Inlet, pay to liquify it, burn up some of it while you’re liquefying it, put it in a tanker and deliver it for $5.50 per million btu and make money,” he said. “It is an inhospitable market and will be for the near future.”

Rep. Mike Chenault, R-Nikiski, said he isn’t surprised at the news. He’s been hearing rumors that the plant might shut down.

“They’ve been talking about it and naturally there’s not as many employees there now as there was five years ago,” he said.

But the company’s decision to pull out of the LNG export market could have larger implications for the state. That glut of global LNG is also a roadblock to the state’s efforts to woo investors and build a pipeline to get Prudhoe Bay’s enormous reserves to market.

And the financial future of that project — the Alaska LNG project — has been in question for a while.

The legislature briefly considered cutting $50 million in funding from the Alaska Gasline Development Corporation tasked with developing that project earlier this year. But Chenault said lawmakers ultimately decided to leave the funding in the budget.

In part, he said, because a glut of gas won’t last forever.

“I don’t know if (Alaska LNG would) ever be viable in the current market. But markets change. And sometimes they change drastically as we well know with the price of a barrel of oil or the price of a cubic foot of gas,” Chenault said.

It’s possible that a buyer will take over the facility.

Burnett said the company is still negotiating with potential buyers. But, she didn’t say who those potential buyers were or how those negotiations are going. She said they’re confidential.

In January, the state’s gas corporation revealed that it was negotiating with the company to potentially purchase the site.

Any new buyer would need to get an export license if it wanted to sell gas to foreign markets — the company’s current federal license expires in February of 2018.

More in News

Jason Criss stands for a photo in Soldotna, Alaska, after being named a qualifier for the Special Olympics USA Games on Thursday, July 10, 2025. (Jake Dye/Peninsula Clarion)
Soldotna athlete to compete in 2026 Special Olympics USA Games

Thousands of athletes from across all 50 states will be competing in 16 sports.

The entrance to the Homer Electric Association office is seen here in Kenai, Alaska on May 7, 2020. (Photo by Brian Mazurek/Peninsula Clarion)
HEA opens bids for real property

The deadline to submit bids is 5 p.m. on Aug. 11.

Arturo Mondragon-Lopez, Jr. (right) attends a change of plea hearing related to the October 2023 fatal shooting of Brianna Hetrick on Wednesday, Feb. 5, 2025, at the Homer Courthouse in Homer, Alaska. (Delcenia Cosman/Homer News)
Mondragon-Lopez sentenced for death of Homer woman

Arturo Mondragon-Lopez, Jr. accepted a plea deal in February for the shooting of Brianna Hetrick.

Soldotna City Hall is seen on Wednesday, June 23, 2021 in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Soldotna OKs $395,000 capital plan

This year’s list of capital projects is “nominal compared to some past years,” according to officials.

A map of areas proposed for annexation by the City of Soldotna. (Provided by City of Soldotna)
Soldotna adds annexation proposal to ballot

The proposed annexation is split across five small areas around the city.

Nets are extended from North Kenai Beach in Kenai, Alaska, during the first day of the Kenai River personal use dipnet fishery on Thursday, July 10, 2025. (Jake Dye/Peninsula Clarion)
‘A really good day’

Kenai River personal use sockeye salmon dipnet fishery opens.

The entrance to the Kenai Peninsula Borough building in Soldotna is seen here on June 1. (Photo by Brian Mazurek/Peninsula Clarion)
Borough assembly to consider ordinance to increase residential property tax exemption

If approved by voters in October, the ordinance would increase the tax exemption by $25,000.

Vice President Kelly Cooper speaks during a meeting of the Kenai Peninsula Borough Assembly in Soldotna, Alaska, on Tuesday, July 8, 2025. (Jake Dye/Peninsula Clarion)
Borough considers seasonal sales tax rate

Borough sales tax would be modified from a flat 3% to a seasonal model of 4% in summer months and 2% in winter months.

Most Read

You're browsing in private mode.
Please sign in or subscribe to continue reading articles in this mode.

Peninsula Clarion relies on subscription revenue to provide local content for our readers.

Subscribe

Already a subscriber? Please sign in