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US DOE to consider ConocoPhillips Alaska LNG project separately: source

Highlights

The US Department of Energy will consider an application by ConocoPhillips to resume liquefied natural gas exports from Alaska separately from an ongoing agency review process of plans to ship LNG to countries without free trade agreements with the US, a DOE official said Friday.

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While the official, who spoke on the condition of anonymity, would not say when the ConocoPhillips application could be approved, the separate consideration ensures that the Alaska project will not face years of potential delay as DOE considers roughly two dozen applications that would have been ahead of it in a queue.

"It's really, fundamentally, a different project than the other ones we're considering," the DOE official said.


DOE has established a queue for approving applications to ship LNG to countries that do not have free trade agreements with the US, based on when an application was filed and whether the applicant has pre-filed with the Federal Energy Regulatory Commission.

The ConocoPhillips project would have been 24th on this list, but DOE will instead consider the project under a short-term import/export application process, separate from the order of precedence set up for processing long-term authorizations, the official said.

The Alaska project is being considered separately because it is seeking a reauthorization for less than two years of exports, the official said. In addition, the amount of LNG to be exported from the Alaskan project is "miniscule" compared with export projects in the DOE queue, the official said.

In December, ConocoPhillips applied to DOE for a two-year authorization to export about 20 Bcf/year (566 million cu m/year) of LNG from its mothballed plant on the Kenai Peninsula south of Anchorage. The plant will be operated on a seasonal basis when regional demand is low, the company said.

By comparison, Cheniere Energy's Sabine Pass LNG, the only US project that has both DOE and FERC approval, has been green lighted to ship 2.2 Bcf/d from its terminal, roughly 783 Bcf per year more than ConocoPhillips has requested for Kenai.

By law, DOE has to quickly approve FTA applications but can block or modify requests to ship LNG to non-FTA countries if it finds they are not in the public interest. Japan, the market ConocoPhillips would likely target, does not have an FTA with the US.

The Alaska plant was built in 1969 by Phillips Petroleum and Marathon Oil, with ConocoPhillips eventually buying out Marathon's stake. The plant operated until last year when the export license expired and declining gas production in Cook Inlet limited the gas available.

In the applications, ConocoPhillips said exporting gas from Kenai again will provide another demand source during warm winter months when regional demand is relatively low. Exports will also provide "an economic incentive and market opportunity for continued exploration and additional gas supply development in the Cook Inlet," the company said.

In its applications, ConocoPhillips said the proposed exports would have no environmental impacts since no changes were needed at the Kenai facility. It asked DOE to act on the request within 90 days so that LNG exports could start back up in the second quarter of 2014.

--Brian Scheid, brian.scheid@platts.com
--Edited by Keiron Greenhalgh, keiron.greenhalgh@platts.com