August 27, 2002 --- Vol. 8, No. 87August 2002

Kenai Kachemak Pipeline secures long-term commitments, finalizes design

Kenai Kachemak Pipeline LLC announced today that it has secured two long-term capacity commitments and finalized the design of a 33-mile-long, 12-inch diameter natural gas pipeline.

The open access pipeline will transport gas from the Ninilchik unit discovery recently announced by Marathon Oil Co. and Unocal Alaska, Kenai Kachemak Pipeline said. The pipeline will interconnect with existing pipelines in the Kenai field area and from there gas will move to markets on the Kenai Peninsula and in the Anchorage area.

The company said the common carrier pipeline is designed to transport as much as 120 million cubic feet of natural gas per day and is projected to cost $25 million to design and construct.

KKPL is jointly owned by Marathon and GUT LLC, a wholly owned subsidiary of Unocal Corp. Marathon has a 60 percent interest, while Unocalís subsidiary holds the remaining 40 percent. Ownership interests are in direct proportion to the gas shipment commitments made by Marathon and GUT LLC's producer affiliate, Unocal Alaska, Kenai Kachemak said.

Marathon and Unocal have committed to initially ship natural gas through KKPL for 15 years.

"KKPL is pleased with the results of the recent open season for potential shippers. While initial volumes will come from Marathon and Unocal Alaska, additional capacity will be available for other suppliers that wish to contract for service," said Unocal's Ronald Kaltenbaugh, president of KKPL. "All required permits and applications for the project have been submitted to the applicable agencies having jurisdiction and reviews are in progress. Pending approval, we anticipate to begin construction in January 2003."

"Several key contracts have been finalized during the past few weeks. Norstar Pipeline Co., a subsidiary of Enstar Natural Gas Co., will be managing the construction activities for KKPL, as well as providing daily operation and maintenance services once the pipeline is in service, while Marathon will manage contract gas shipments," said Marathon's Ben Schoffmann, a member of KKPL's management committee.

KKPL also recently received a final consistency determination on the Alaska Coastal Zone Management Program from the Department of Governmental Coordination. KKPL solicited bids for line pipe on Aug.12 and is in the process of reviewing the responses. Bids for major equipment and construction services will be solicited within the next few weeks.

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