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NEWS BULLETIN

September 21, 2017 --- Vol. 23, No. 28September 2017

IEP agrees to gas supply contract with Hilcorp

The Alaska Industrial Development and Export Authority's Interior Energy Project has signed a gas supply agreement with Hilcorp Alaska, thus opening the way for the project to move forward. During its board meeting today the AIDEA board approved the gas supply contract and an associated plan for completing the IEP. The objective of the IEP is to enable a greatly expanded supply of natural gas at a viable price in Fairbanks and the surrounding region of the Interior.

The IEP plan involves expanding an existing liquefied natural gas plant near Point Mackenzie on Cook Inlet, beefing up the transportation arrangements for shipping LNG from the plant to Fairbanks, expanding the LNG storage capacity in Fairbanks and building out the gas distribution pipeline network in the Fairbanks area.

AIDEA currently owns Pentex Natural Gas Co., the owner of the LNG plant, the LNG road transportation system and Fairbanks Natural Gas, one of the two current gas utilities in Fairbanks. Part of the IEP plan that now has funding approval involves selling Pentex to the Interior Gas Utility, the other Fairbanks gas utility: The consequence will be a consolidated utility in Fairbanks that can efficiently build out and operate the gas supply system.

The gas supply contract with Hilcorp runs to 2021 and involves gas price of $7.72 per thousand cubic feet. This is expected to result in an initial gas price for Fairbanks consumers of $19.88 per mcf. The IEP's target price for gas delivered to consumers is $15 per thousand cubic feet. However, over a period of three years the price of gas in real terms is expected to drop below that target level, as gas demand in Fairbanks builds.

- ALAN BAILEY

See story in Oct. 1 issue of Petroleum News, available online Friday, Sept. 29 at www.PetroleumNews.com

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