Enstar files modified Furie contract

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Enstar Natural Gas Co. has asked the Regulatory Commission of Alaska to approve a change in the terms of the utility’s gas supply agreement with Furie Operating Alaska, to accommodate a delay in the completion of the third well in Furie’s Kitchen Lights gas field. The agreement originally required Furie to complete a third well in the field by the end of 2016, to demonstrate Furie’s ability to meet the gas supply commitments in the agreement. But following a delay in the drilling, Enstar agreed to extend the deadline to July 31, 2017.

However, Furie did not manage to complete the well by that July deadline: Enstar has now agreed to extend the deadline to July 31, 2018, but needs RCA approval of the change. The new agreement requires Enstar to provide proof of an alternative source of supply from a viable Cook Inlet producer, should Furie be unable to fully meet its contractual obligations with Enstar. And, under the terms of the original agreement, Furie’s failure to meet the drilling deadline has triggered a drop in the price of gas in the contract, Enstar says.

Enstar says that it has conducted due diligence into the adequacy of the modified contract.

“Enstar’s opinion is based on the contractual remedies in the GSA (gas supply agreement), including a $6 million letter of credit and an industry-standard cover provision, and a change in management both at Furie and at its parent company,” Enstar wrote.

Furie currently has two wells producing gas from Kitchen Lights, a converted exploration well and a development well. The company used the Randolf Yost jack-up drilling rig to drill a third well in 2016 but did not complete that well before the end of the drilling season. The extension of the drilling deadline to July 2018 would appear to indicate that Furie has not conducted drilling at Kitchen Lights this summer. Furie has not responded to requests from Petroleum News for information about the drilling status.

- ALAN BAILEY