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Vol. 9, No. 38 Week of September 19, 2004
Providing coverage of Alaska and northern Canada's oil and gas industry

ExxonMobil: plenty of market for state’s share of North Slope gas

Kristen Nelson

ExxonMobil answered questions on natural gas marketing at the third interim hearing of the Legislative Budget and Audit and Senate Resources committees of the Alaska Legislature Sept. 1 in Anchorage.

“If Alaska is selling gas, will we be competing with the largest corporation on the entire planet?” asked Rep. Ralph Samuels, R-Anchorage, chairman of Budget and Audit.

Richard Guerrant, vice president Americas, ExxonMobil Gas & Power Marketing Co., told Samuels there are “plenty of buyers out there that are willing to go out and buy the gas.” If the state took its gas in kind, he said it would have “plenty of opportunities to sell.”

Guerrant said ExxonMobil sells most of its gas “on short-term contracts and those are for 30 days, daily and for a year” and has “very few longer-term contracts” because in today’s marketplace customers “are not willing to sign up for long-term contracts.” Customers include local distribution companies, industrial customers and marketers, and the market is diverse, he said.

Marty Massey, ExxonMobil Production Co. joint interest manager, said the state could sell direct or through someone else: “The state can develop that expertise and sell the gas or they could potentially sell the gas to someone and have them contract out that responsibility.”

Exxon noncommittal on possible state ownership in gasline

Sen. Kim Elton, D-Juneau, asked about potential state ownership in a gas pipeline, and Massey said they had to be “a bit vague” because “we’re in the middle of negotiations with the state.”

If the state took some ownership in a gas pipeline, “we would be aligned,” Massey said, and if the state took gas in kind, it could use that gas as it sees fit. And the state would get revenues from an investment in the pipeline.

If the state takes its gas in kind, it would have the same decisions to make as other owners about where to take ethane out of the gas. Some liquids have to be removed to meet pipeline specifications, Guerrant said, and other extraction, primarily ethane, is “based upon the market conditions.”

Ethane extraction “to try to get more value for the product stream” could be done in Alberta, he said, because “there’s a tremendous amount of capacity there that we can utilize,” although, he said, ExxonMobil “may take it on down to Chicago and process ourselves,” but that decision would be made “on a month basis of how much of that ethane that we will extract.”

If the state takes its gas in kind, it will have the same decisions to make, based on the marketplace, he said.



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