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Andeavor buys Kenai LNG plant in Alaska from ConocoPhillips

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Andeavor buys Kenai LNG plant in Alaska from ConocoPhillips

Anchorage — Andeavor has acquired ConocoPhillips' mothballed Kenai LNG plant in Alaska and expects to use the facilities to support operations at its nearby refinery, an Andeavor spokesman confirmed Monday.

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Andeavor operates a crude oil refinery near the LNG plant at Nikiski, on the Kenai Peninsula south of Anchorage.

"This acquisition further strengthens our integrated value chain by optimizing our operations in Kenai and providing low-cost fuel for our refinery to produce fuels," spokesman Scott LaBelle said via email.

LaBelle could not say whether Andeavor would consider resuming LNG exports from the plant, which last occurred in 2015. The plant has the capacity to produce about 1.6 million mt/year of LNG. "We are still considering our options," he said.

Larry Persily, an Alaska energy consultant and a former federal natural gas pipeline administrator, said the US Department of Energy export license for the plant expires next month, so it would make sense to use the plant to support the refinery and for regional uses, even imports of LNG.

"Andeavor has no gas production and no gas leases. And, energy is a big cost for running a refinery," Persily said.

ConocoPhillips spokeswoman Amy Jennings Burnett said, "The sale closed and operatorship was transferred to Andeavor on January 31. A total of about a dozen ConocoPhillips employees and about 15 contract workers were affected by the transaction." Several employees were reassigned within ConocoPhillips and others transferred to Andeavor, she said.

The plant was built in 1969 by Phillips Petroleum and Marathon Oil Co., ushering in the first regular long-distance ocean shipments of LNG.

LNG sales contracts with Tokyo Gas and Tokyo Electric were supplied from Kenai until 2011 and terminated because of concerns about declining Cook Inlet gas reserves.

ConocoPhillips, which by then had purchased Marathon's share, considered closing the plant but kept it open after the Japan earthquake and tsunami caused that country's nuclear generation plants to shut down.

Ten shipments of LNG, mostly to Japan, were made between 2012 and 2015 on a spot-contract basis. In 2016 ConocoPhillips announced it would sell the mothballed plant and began searching for buyers.

While Alaska's Kenai Peninsula has supported LNG exports for decades, there are plans to build a large 20 million mt/year plant at a site near the existing small plant as a part of the Alaska LNG Project.

About 600 acres of land at Nikiski have been purchased by Alaska LNG for the plant and a related LNG marine shipping terminal, which would also be built.

Existing facilities at the former ConocoPhillips plant are too small and obsolete to be used for Alaska LNG.

The Alaska Gasline Development Corp., Alaska's state gas corporation, is leading the Alaska LNG Project and concluded an agreement to negotiate sales contracts for 15 million mt/year of LNG last November with China's Sinopec.

AGDC hopes to finalize the Sinopec contract by next December, begin construction in 2019 and to have LNG exports underway by 2024 or 2025.

--Tim Bradner,
--Edited by Lisa Miller,