During a Regulatory Commission of Alaska public meeting on Oct. 14, held to review the Cook Inlet gas supply situation for local utilities, several utilities mentioned difficulties in negotiating new gas supply contracts with gas producer Hilcorp Alaska because of a Federal Trade Commission investigation into Hilcorp’s proposed purchase of Marathon Oil Co.’s Cook Inlet assets. Apparently the Alaska attorney general is also involved in the investigation.
Having already taken over all of Chevron’s Cook Inlet properties, Hilcorp in April of this year announced an agreement for the purchase of the Marathon assets. Completion of the Marathon buy-out would leave Hilcorp and ConocoPhillips as the dominant producers of gas from the Cook Inlet basin.
It emerged during the summer that the Federal Trade Commission, or FTC, presumably worried about the possibility of a single company having a substantial share of a small and isolated gas market, was initiating an investigation of the deal between Hilcorp and Marathon. The deal cannot be completed until FTC has finished its investigation.
Meantime, according to Southcentral gas and power utilities, negotiations over potential new utility gas supply contracts are in something of a state of limbo. Presumably, Marathon cannot sign new contracts for resources that it is in the process of relinquishing, while Hilcorp is apparently unwilling to negotiate new long-term supply contracts while uncertainty remains over its purchase of the Marathon assets.
As gas production declines from the Cook Inlet gas fields, utility gas supplies secured under contract are starting to fall short of anticipated gas demand. The utilities are anxious to negotiate new supply contracts to fill these supply gaps, with Hilcorp being the largest gas supplier if the company’s purchase of the Marathon assets goes through. There is also worry about the possibility of a hiatus in some development drilling until the situation is resolved.
—Alan Bailey
