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NEWS BULLETIN

February 06, 2002 --- Vol. 8, No. 15February 2002

Anadarko, AEC provide information on offer for state's royalty gas

Anadarko Petroleum Corp. and AEC Marketing (USA) Inc. handed out copies of the joint offer they submitted Feb. 1 for the state's North Slope royalty gas.

Information on the other three offers the state received is scanty or confidential.

Kevin Banks, petroleum market analyst with the Division of Oil and Gas, told PNA Feb. 6 that the bid from Alaska Power and Telephone Co. is for 1.6 million cubic feet a day (the state offered approximately 350 million cubic feet a day). The company said it would pay what the state receives for royalty-in-value gas for the royalty-in-kind gas and offered no premium. Banks said Alaska Power provided a white paper explaining that they would use the gas for customers in Tok and Dot Lake, and also to generate electricity.

The Chevron U.S.A. Inc. bid is for 375 million cubic feet a day with an offering a price "based on the RIV value," a non-monetary mechanism for the option to reduce volumes and a non-monetary benefit. Banks said Chevron wants details of the proposal kept confidential.

The Williams Energy Marketing and Trading Co. proposal is entirely confidential. Banks said Williams provided a statement which said it is the company's standard practice to submit all such responses to bid requests under confidential terms and conditions.

The Anadarko-AEC offer includes a minimum cash bonus of $350,000, based on the assumption that the 70 percent of the state's royalty Alaska North Slope gas will be 350 million cubic feet a day. The base price would be the weighted average royalty-in-value price and the companies' offered a price premium of 2 cents per million Btu for each MMBtu purchased during the primary term. The price premium would be increased by 2 cents per MMBtu for each subsequent five-year renewal period.

Anadarko-AEC offered an option payment of $2 million for each five-year term with an initial cash payment of $2 million to be paid upon execution of a contract and approval by the Legislature.

Anadarko and AEC committed to an exploration work commitment of $50 million from 2002 through 2007 and will pay the state the shortfall amount if the $50 million commitment is not met.

In addition, the Anadarko-AEC offer includes a preference for local hire and a preference for in-state gas processing, both natural gas liquids extraction and petrochemical manufacturing.

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