May 09, 2008 --- Vol. 14, No. 49May 2008

Aurora, Enstar settle dispute over Moquawkie production

Aurora Gas and Enstar Natural Gas Co. have settled a long-standing legal case regarding the October 2006 suspension of gas supplies to Enstar from Aurora’s Moquawkie natural gas field on the west side of Alaska’s Cook Inlet.

Aurora had said that Moquawkie production was no longer economic under the terms of a supply contract with Enstar and that, under the terms of an “economic out” clause in that contract, Aurora had the right to suspend gas deliveries. Enstar disputed Aurora’s position and sued for breach of contract.

In a settlement agreement dated April 18, the two companies have agreed to terminate the Moquawkie contract, with an effective termination date of Oct. 1, 2006. Aurora has agreed to pay Enstar $11,225,000, which Enstar says represents an “essentially full recovery of the increased gas costs incurred from October 2006 through May 2008” as a result of Enstar having to replace Moquawkie gas with gas from a more expensive source.

Aurora has also agreed to pay an additional $100,000 to Enstar “in connection with terminating the litigation,” Enstar said May 6 in a letter to the Regulatory Commission of Alaska. The settlement requires approval by RCA.

Enstar said it will use its net proceeds from the settlement to reduce the gas cost adjustment that it charges its customers.

Power loss temporarily halts production at Prudhoe

Operations at Prudhoe Bay stopped this morning after a worker accidentally cut the power supply to several processing facilities at the North Slope oil field.

A front-end loader clearing snow drifts just after midnight hit a compressed air line at the central power station of the nation’s largest oil field, triggering an automatic shutdown of electricity to three gathering centers and three flow stations, as well as the supply of fuel gas used to power the Northstar field.

Although the Lisburne field also lost power, a separate generating facility at the satellite kicked on several hours later. The other power stations went back online earlier this morning, restoring electricity to Prudhoe Bay, but production remains at less than normal levels while operators bring the processing plants back online in a precise sequence.

The only abnormality so far has been overheating at Gathering Center 1, which BP shut down, according to spokesman Steve Rinehart.

Although Rinehart couldn’t give exact figures on the production loss, he said the fields that were impacted average 380,000 to 400,000 barrels of oil per day.

“We expect a significant production loss today,” Rinehart said.

No one was hurt and no oil was spilled in the accident. Rinehart said Prudhoe Bay weather has been “severe” in recent days, including ground blizzards strong enough to force crews inside except for emergencies.

Note: See full stories in the May 18 edition of Petroleum News, available online a week from today.

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