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NEWS BULLETIN

August 15, 2011 --- Vol. 17, No. 70August 2011

Three new gas supply contracts for Enstar

Southcentral Alaska gas utility Enstar Natural Gas Co. has submitted three new gas supply contracts to the Regulatory Commission of Alaska for approval. One of the contracts, for gas from Buccaneer Energy’s newly discovered Kenai Loop gas field on the Kenai Peninsula, commits to firm gas supplies after Cook Inlet Natural Gas Storage Alaska’s new Kenai Peninsula gas storage facility goes into operation in 2012. Prior to then, the contract would enable Buccaneer to bid to help fill any shortfall in Enstar’s peak winter gas needs between December 2011 and March 2012.

The other two contracts, with Aurora Gas and Cook Inlet Energy, will enable those companies also to bid to help shore up Enstar’s peak winter gas supplies. Enstar has insufficient contracted, guaranteed gas supplies to meet projected peak demand in the winter of 2011-12 — the company plans to use the gas supply bidding system that it pioneered in the previous winter to bolster its supplies.

Contracts for the supply of bid gas do not guarantee to make gas supplies available but do allow gas producers to bid to deliver to Enstar any gas that they have for sale on a daily basis.

As part of its efforts to minimize the risk of running short of gas during the winter Enstar already has contracted arrangements for the potential purchase of “non-firm” gas from Unocal (Chevron), Marathon, ConocoPhillips and Anchor Point Energy (Armstrong).

Settlement reached on Beluga pipeline tariff

The parties to a Regulatory Commission of Alaska investigation into a proposed new tariff for the Beluga gas pipeline on the west side of the Cook Inlet have reached a settlement over the terms of the tariff. With the line being a critical link in the natural gas infrastructure on the west side of the Inlet, the tariff on the line is of great importance in determining how gas producers and utilities transport gas between from gas fields to market, and in determining the cost of that gas on delivery.

In December 2010, Beluga Pipe Line Co., a subsidiary of Marathon Oil Co., filed its new tariff proposal, involving fees for reserving space in the line rather than charging for the volume of oil shipped. The tariff would have enabled the shipping of gas in unreserved capacity under certain circumstances, but at a greatly elevated volumetric fee.

Beluga Pipe Line said that the new tariff was addressing the problem of shippers only using its line during winter spikes in gas demand, a usage pattern that rendered a traditional volume throughput fee impractical to operate. The proposal provoked a flurry of concerns from gas shippers.

Under the terms of the settlement, gas shippers will be able to book firm capacity on the line, with the fees being equal to the current usage rate if all of the booked capacity is used. However, any unused capacity can be carried forward for use at a later date in the same contract year. And there is a provision for the use of any available spare capacity on the line at the same rate, but with no guarantee that this capacity will be available.

See full stories in the Aug. 21 edition of Petroleum News, which will be available online to paid subscribers at 11 a.m. Friday, Aug. 19, at www.petroleumnews.com.

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