Oil and gas company Marathon Petroleum said global instability was complicating its plans on the Kenai Peninsula.
It always aims to transform a decades old liquefied natural gas export plant there at an import facility, so it can ship fuel for its crude oil refinery later.
But he wants more time. Federal regulators granted a project extension yesterday, pushing the project deadline to 2025.
The company said the future of the project hinged on finding a competitive fuel source – which in today’s market seems more difficult than ever.
Jason Feer, global business manager at Houston-based intelligence firm Potent and Partners, said Marathon isn’t the only company seeking competitively priced natural gas. The war in Ukraine has created surprisingly high demand abroad.
“It drove the prices really high,” he said.
And that complicates Marathon’s plans to start importing gas to the facility, near Nikiski.
The establishment was previously a exporter of liquefied natural gas — and, for five decades, the only one in North America.
As the global natural gas market became more competitive, then-owner ConocoPhillips mothballed the facility. Marathon took over ownership in 2018.
And a year later Trans-Foreland Pipeline, a subsidiary of Marathon, asked to convert this export facility into an import facility. Federal regulators tell the company he had until December 2022 to do so.
But in a filing last month, the company told regulators it did not expect to complete the project by then, “despite good faith efforts to do so.”
He said the global instability due to the COVID-19 pandemic and the war in Ukraine gave the company pause to make a decision about the project and its source of supply. Feer said the instability is driven by increase in European demand for liquefied natural gas as Russian suppliers reduced their activities.
“So you’d think the next few years you’d see pretty high LNG prices that would make new entrants to the LNG market think twice about whether it’s competitive,” he said. “And they should really dig into the details of how they’re going to use it and what it’s going to cost.”
Imported liquefied natural gas would likely be a source of fuel for the Marathon crude oil refinery down the street, according to this filing and previous ones.
But now it is a question of where the company will get the gas from and if it can get it at an affordable price. And Feer said it may take three or four years, at least, for producers in the United States and Qatar to build capacity to meet strong global demand.
Still, the company said in its letter to federal authorities that it was confident the project was commercially viable and was looking for a supplier. “TransForeland has also been actively seeking suitable suppliers and monitoring LNG markets around the world,” he said.
Feer said it wouldn’t be too difficult for Marathon to convert the export facility to an import facility, as it already has much of the infrastructure and materials it needs.
That said, he said these costs are not inconsequential. And Feer said companies want to make sure they can recoup their investments first before pouring money into a new project.