Utilities buy BelugaML&P, Chugach Electric buy Conoco’s share of major Cook Inlet gas field ALAN BAILEY Petroleum News
Anchorage-based electric utilities Municipal Light & Power and Chugach Electric Association are jointly purchasing ConocoPhillips’ ownership interests in the Beluga River gas field on the west side of Alaska’s Cook Inlet, the two utilities announced Feb. 8. The sales agreement, with a total purchase price of $152 million, involves transferring 70 percent of ConocoPhillips’ ownership interests to ML&P and 30 percent of the interests to Chugach Electric. ML&P, which already owns one-third of the field, will then end up with a 56.67 percent interest in the field, with Chugach Electric having a 10 percent interest. Hilcorp Alaska will continue to own one-third of the field and will take over from ConocoPhillips as field operator.
The utilities say that their share of the Beluga River field will meet a significant portion of their gas needs over the next 10 years
ConocoPhillips spokeswoman Amy Burnett told Petroleum News in a Feb. 9 email that the sale transaction should be completed in the spring. The company announced in August that it was going to sell its Cook Inlet gas field assets, including its interests in the Beluga River field and its 100 percent ownership of the North Cook Inlet field. The company has yet to make any statement about the proposed North Cook Inlet sale.
Low cost gas The motivation behind the utilities’ purchase of gas field interests is the securing of power station fuel gas at what the utilities anticipate to be below market cost. Essentially, the utilities would supply themselves with their own gas at the cost of gas production. ML&P, an entity owned by the Municipality of Anchorage, has already been enjoying the benefit of a relatively cheap gas supply since it purchased its original one-third interest in the Beluga River field in 1996. According to a Feb. 8 press release from ML&P and Chugach Electric, the benefits to ML&P over the years have exceeded $350 million, with the utility’s ratepayers saving an estimated $239 million in fuel gas purchasing.
The two utilities say that, while under existing gas supply contracts for 2018 Chugach Electric will pay about $7.53 per mcf of gas and ML&P will pay about $8.78, ML&P’s current cost of gas production at Beluga River is $4.35 per mcf.
“ML&P’s initial investment in the Beluga River gas field proved to be highly beneficial to our ratepayers,” said ML&P General Manager Mark Johnston in response to the newly announce purchase of additional Beluga River interests. “We were glad to partner with Chugach to spread the financial benefits and energy security of gas ownership to more Anchorage families and businesses.”
“At Chugach, we are always looking for opportunities to safely deliver efficient, affordable energy to Anchorage consumers and businesses and we are pleased to be partnering with the Municipality of Anchorage and ML&P in that effort,” said Janet Reiser, chair of the Chugach Electric board. “We believe this partnership will allow us to continue to secure low-cost and reliable supplies of natural gas for Anchorage and look forward to more opportunities where we can work together to best serve our consumers.”
Suggested by mayor Anchorage Mayor Ethan Berkowitz, who in September suggested that the municipality might make an offer on behalf of ML&P for ConocoPhillips’ gas assets, expressed his satisfaction with the deal.
“Today, we secured a long-term gas supply for ML&P ratepayers, providing a quality and reliable resource at a very low cost,” Berkowitz commented in the Feb. 8 press release. “By partnering with Chugach, we were able to spread these benefits to more residents of the Anchorage Bowl. I want to thank the MOA team, the Anchorage Assembly, and Chugach for working together to make this deal happen.”
Hilcorp operator In a Feb. 9 email, Hilcorp spokeswoman Lori Nelson said that her company is pleased to become operator at Beluga River - Hilcorp acquired its one-third interest in the field when it purchased Chevron’s Cook Inlet assets in 2012. Nelson said that Hilcorp will work diligently with ConocoPhillips to provide a smooth transition for everyone involved.
“As operator, we will make producing energy for our partners and for Alaskans our top priority,” Nelson said. “Responsible and sustainable development remains key to our success. We look forward to applying those same principles to the Beluga River unit when we assume operatorship.”
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