Exporting Liquid Natural Gas: Alaska's Abbott and Costello, "Who's On First?"

They say working Sudoku puzzles may help delay/prevent Alzheimer's Disease. I have no idea, but if so, trying to follow this story may be just as helpful.

The story takes place in south central Alaska.

Apparently most space heating in homes and buildings in south central Alaska heat their homes with natural gas.

To provide that natural gas, a new $180 million storage facility has been completed, but due to a contract dispute there may not be enough natural gas delivered to the facility for "optimal efficiency."

The storage facility is designed to hold a maximum of 11 billion cubic of natural gas. It needs to have
seven billion cubic feet of gas to provide enough pressure for withdrawals of stored gas to be done efficiently, although the facility can operate with less pad gas but its performance will not be optimal.

It is estimated that 30 million cubic feet of gas will be required daily by consumers this winter.

It sounds like the facility gets the majority of natural gas from five Marathon wells collocated with the new storage facility but needs an additional 2 billion cubic feet to pressurize the facility to seven billion cubic feet.

So, that seems simple enough. The operator of the storage facility contracted with a producer to provide an additional 3.24 billion cubic feet.

The Sukodu puzzle begins.

1. The operator of the storage facility did NOT identify the producer who signed the contract.

2. Marathon says they signed a contract to deliver 3.24 billion cubic feet, but the terms of the contract stated that "it was simply an option." Interesting contract. This is perhaps the most peculiar piece of the story. An option?

3. There are rumors that the unnamed producer sold the natural gas to Japan for a higher price. It seems there should be a receipt lying around somewhere for 3.24 billion cubic feet of gas if it was sold to Japan, or to whomever they sold the gas. I have trouble getting out of Costo without a receipt for significantly less.

4. Marathon sold its interest in the local LNG export facility in 2011, and no longer has an export license, so, of course, they never sold that natural gas to Japan. Or perhaps better said, they never "exported" any natural gas to Japan.

5. ConocoPhillips Alaska operates that new $180 million LNG export facility, has an export license, and is "rumored" to have purchased LNG from other producers. ConocoPhillips Alaska says they cannot comment on the matter. Which begs the question.

6. So far we have this:

a) a storage facility that won't identify the producer who was to have provided the natural gas for a new storage facility
b) Marathon says they signed a contract but it was just an "option"
c) ConocoPhillips who operates the storage facility and has an export license, say they cannot comment

The politicians assume "someone" sold the natural gas to Japan for a higher price but, so far, no one is shedding much light on the matter. And, speaking of light, I assume the days are starting to get noticeably shorter in south central Alaska.

A politician complained:

“I support free market principles that allow those with a commodity to sell it at the highest price they can. However, there has long been an informal understanding between Cook Inlet producers, utilities and the state that local needs must be met. I am deeply disappointed that a producer would disregard what I see as a responsible corporate citizen’s obligation to the people of Alaska.”

The story is posted for archival purposes. Something tells me we have not heard the last of this story.