Andeavor buys ConocoPhillips LNG holdings in Nikiski

Feb 8, 2018

An LNG tanker is loaded at the former ConocoPhillips Kenai LNG Plant. It was purchased in Jan. 2018 by Andeavor, the former Tesoro, owners of the oil refinery in the distance.
Credit Photo ConocoPhillips

  The mothballed natural gas liquefaction plant in Nikiski has a new owner, changing hands officially a week ago. ConocoPhillips sold its Kenai LNG plant to its industrial park neighbor, Andeavor, which operates the crude oil refinery across the street. 

The price of the sale was not disclosed. Nor were Andeavor’s plans for the nearly 50-year-old facility. A quote from Andeavor spokesman Scott LaBelle in an announcement caught the eye of former Kenai Peninsula Borough mayoral chief of staff, Larry Persily, an expert on natural gas issues.

LaBelle said that the acquisition would provide “low-cost fuel for our refinery to produce fuels.”

“One of the biggest expenses for a refinery is energy. It’s certainly the payroll, it’s certainly the feed stock of the crude oil that you bring in, but it takes a lot of energy to run a refinery,” Persily said. “So you look at that statement and it would seem to indicate that they’re not about to get into the export business. That they’re looking at, ‘how can this plant help them reduce their energy costs?’ That’s what I would draw from that.”

Persily pointed out that an export facility like the one at Kenai LNG, with it’s deepwater dock, could be used as an import facility.

“If buying this plant is somehow related to managing and possibly reducing your energy costs at the refinery - gee, the only way I can think is the plant will give you the option to bring in BTUs of energy at a lower cost than you can buy them locally,” he said. 

“But that may be irresponsible speculation on my part. I have no idea.”

Persily points out that Andeavor has no natural gas production or leases in the Cook Inlet area, making it less likely that it plans to restart the mothballed LNG plant, which last operated in 2015. 

“Nothing’s going to happen right away, would be my guess,” Persily said. “And then certainly if that was one of the possibilities, you’d have to look at how much it’s going to cost me to do it, how long it’s going to take, how much do I save. No business is going to spend a dollar to save a penny. You’d have to spend a lot of money. I don’t know how much - tens of millions, is a guess.”

In a statement from a ConocoPhillips spokeswoman quoted in a trade publication, a total of a dozen company employees and 15 contract workers were affected by the sale. Several were reassigned within the company, and others transferred to Andeavor.