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July 25, 2013 --- Vol. 19, No. 48July 2013

Enstar seeking approval for new gas supply contract with Hilcorp

Enstar Natural Gas Co. has asked the Regulatory Commission of Alaska to approve a new gas supply contract that Enstar has agreed to with Cook Inlet gas producer Hilcorp Alaska. The new contract, which runs from April 1, 2014, to March 31, 2018, will ensure that Enstar can meet all of its customers’ gas supply needs through to the first quarter of 2018, Enstar has told the commission.

With declining gas production from aging Cook Inlet gas fields, Enstar and other Southcentral gas and power utilities had been considering importing natural gas into the region within the next couple of years or so, to supplement local supplies. Hilcorp, now the dominant gas producer in the Cook Inlet basin, has been pursuing an aggressive development program in the Cook Inlet gas fields that it has purchased from Chevron and Marathon over the past couple of years.

Enstar’s new contract with Hilcorp provides for the supply of volumes of gas ranging from 10 billion cubic feet of gas in the first year of the contract to 21.5 billion cubic feet in the last year. However, the terms of the contract allow some flexibility in supply volumes, to accommodate the vagaries of factors such as unpredictable weather in Southcentral.

Gas prices for “base load gas” over the life of the contract start out at $6.86 per thousand cubic feet, rising progressively to $8.03 per thousand cubic feet in 2018. Higher prices would apply to additional gas purchased to meet high winter demand, or to meet any emergency gas needs. The prices match gas price caps set in a consent decree agreed between Hilcorp and the State of Alaska following Hilcorp’s purchase of Chevron’s and Marathon’s Cook Inlet assets.

—Alan Bailey

See story in Aug. 4 issue, available online at 11 a.m. Friday, Aug. 2 at www.PetroleumNews.com

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