In May 2012, ConocoPhillips sent a shipment of LNG to Japan. Another four to five consignments of Alaska LNG are expected to be delivered by the company between now and the year-end. All these deliveries are to be made to Japan, but the customer’s identity has not been revealed.
Located in the Kenai Peninsula community of Nikiski, the plant has a monopoly in LNG export in the U.S. The facility commissioned in 1969 was owned by ConocoPhillips and Marathon Oil Corporation (MRO), with a respective stake of 70% and 30%. For the major part of its operating cycle, the plant sourced its output to Tokyo Gas and Tokyo Electric. Currently, ConocoPhillips is the sole owner of the Alaska facility, after it acquired Marathon’s holding in September 2011.
The partners intended to put the facility under lock and key in early 2011. The decision was based on the plant’s inability to seal any shipping contract with the Tokyo utilities and the hardships faced in obtaining natural gas from the mature Cook Inlet basin. But as a consequence of the natural calamities in Japan in 2011, the Fukushima nuclear power plant was in ruins, giving rise to new demand for Alaska LNG.
The LNG facility was shut down by the end of 2011. The shipment made in May represents the first delivery since fall 2011. However, there is no certainty about the future of this plant. Its future depends on domestic needs, the natural gas yield from the Cook Inlet basin and the accessibility of natural gas through a pipeline from the North Slope to South-central Alaska.
ConocoPhillips holds a Zacks Rank #5, which translates to a Strong Sell rating for a period of one to three months. Longer term, we maintain an Underperform recommendation on the stock.
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