Marathon gets green light to reopen LNG plant — this time, to imports

Dec 21, 2020

ConocoPhillips deactivated the Kenai LNG facility in 2017 and sold it a year later.
Credit Sabine Poux/KDLL

The Kenai liquefied natural gas plant, which exported natural gas overseas from Nikiski for nearly four decades, got federal approval to start importing natural gas. That could give parent company Marathon Petroleum a more cost-effective way to power its crude oil refinery down the street. 

Marathon subsidiary Trans-Foreland Pipeline applied last year to reactivate the historic plant as an import facility.

Last week, Marathon got the green light from the Federal Energy Regulatory Commission, tasked with reviewing natural gas project proposals, though it wasn’t a unanimous decision. One commissioner says he’s concerned the agency didn’t consider the project’s potential effects on climate change.

With approval in hand, the company has two years to act on its proposal. In an emailed statement, a Marathon representative said the company has not yet determined its plans for the facilities going forward, but that the project provides an opportunity for the company to get low-cost fuel to the refinery.

In its heyday, the Kenai plant was the only LNG exporter in the U.S. It was also Japan’s sole supplier of LNG.

But the natural gas market became more competitive. As other exporters crowded the market and Japan sought to diversify its sources, Kenai’s LNG exports shrunk to under 5 percent of Japan’s imports.

It was owned by ConocoPhillips then. The company cited that competition when it mothballed the facility in 2017. 

Marathon bought it in 2018.

Natural gas is about twice as expensive in Alaska than it is in the Lower 48, where there’s generally more available.

But there’s a big need for natural gas in state, including just down the street where the Kenai Refinery needs natural gas to power its crude oil heaters.

That could be a good way for Marathon to save some money.

“Marathon is a multi-faceted, mega company, and they have lots of subsidiaries and probably have a lot of natural gas in their own supply chain," said former Kenai Mayor John Williams. "So chances are, they’re even using some of their own natural gas, which would even reduce the costs that much more.”

If they do reopen, they’ll probably look outside of Cook Inlet for gas, Williams sad.

“There’s no doubt in my mind that they can buy gas cheap enough, either through their own conglomerate or through other suppliers, import it to Alaska, run it in through the refinery and burn it cheaper than they can buy gas here in Cook Inlet," he said.

Currently, Hilcorp owns most of the natural gas production in Cook Inlet.

Separately, the LNG plant is eligible for a spot on the National Register of Historic Places. The facility is still allowed to operate if it receives this designation.