NEWS BULLETIN

August 03, 2010 --- Vol. 16, No. 70August 2010

Enstar and Conoco sign gas supply agreement

Enstar Natural Gas recently signed a natural gas supply contract with ConocoPhillips.

The contract would give Enstar non-firm supplies over the next few years.

While the exact terms of the contract remain unknown, Enstar said it plans to submit the contract to the Regulatory Commission of Alaska for approval sometime in mid August.

Enstar announced the contract in comments to the U.S. Department of Energy supporting a proposed extension of the license that allows liquefied natural gas exports from Alaska.

ConocoPhillips and Marathon Oil jointly own the export facility on the Kenai Peninsula.

Enstar has two gas supply contracts with Marathon, including one approved this year.

In the contracts, both companies “agreed to divert gas from the Kenai LNG export facility to the local market to meet their contractual obligations and, during periods of high gas demand, to make interruptible gas sales,” according to the Aug. 2 comments.

“Neither Marathon nor ConocoPhillips was willing to meet all the unmet needs of Enstar’s customers for gas during the export period on a firm basis, meaning that Enstar will be relying on as-available, non-firm volumes (including flowing gas diverted from the LNG export facility) to meet forecasted peak needs of its customers,” Enstar noted.

If ConocoPhillips or Marathon can’t supply enough gas during peak demand, Enstar said it would “be obliged to find other gas supplies, rely on fuel-switching or electricity imports by local electric utilities, and/or ask customers to conserve gas on peak days.”

Despite those uncertainties, Enstar still supports an extension of the export license because the facility moderates seasonal swings and acts as back-up on peak demand days, and because Marathon can contractually curtail shipments if the facility is shut down.

See story in Aug. 8 issue, available to subscribers online at noon, Friday, Aug. 6, at www.PetroleumNews.com


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