ConocoPhillips (COP) plans to continue operations in its Kenai liquefied natural gas (LNG) plant in Alaska until October. The company has changed its long-standing plan to shut the plant in order to fulfill additional orders. But its original plan to abandon all operations in the plant remains unchanged.
The additional orders include three from Japan and one from China. Presently, the plant continues to operate one cargo per month, mostly to Japan. The LNG plant is co-owned by Marathon Oil Corporation (MRO). It started operations in 1969 and has since been shipping LNG to two Japanese customers –– Tokyo Electric and Tokyo Gas.
However, changes in market trends and systems that make business risky have compelled the company to suspend all operations at the plant. ConocoPhillips also failed to sign new supply contracts with its long-time Japanese buyers and declining gas reserves in Cook Inlet was also responsible for the decision of the plant's closure.
Along with its partner, ConocoPhillips had also been granted an export license extension last year from 2011 to 2013. Due to abundant supply in other regions close to the Pacific, Kenai’s customers did not extend the contract.
The plant may be restarted later, depending on further gas availability in Cook Inlet or if it is made part of regional LNG import facilities, which are under consideration by local utilities. But even after operations are stopped at the plant in the coming months, contracts to supply gas to Alaskan utilities will be honored.
ConocoPhillips has a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. We maintain a Neutral rating on the stock for the long term. B.P. Plc (BP) and Total S.A. (TOT) are major competitors of the company.
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