November 13, 2001 --- Vol. 7, No. 141November 2001

AEC, Anadarko interested in state's North Slope royalty gas

Anadarko Petroleum Corp. and Alberta Energy Co. Ltd. subsidiary AEC Oil & Gas (USA) Inc. have been talking to the state about buying the state's royalty North Slope gas.

Mark Hanley of Anadarko and Alan Sharp of AEC Marketing told a meeting of the Alaska Royalty Oil and Gas Development Board Nov. 13 that they support a state North Slope royalty gas sale and that access to a gas pipeline is a requirement for continuing exploration on their gas-prone acreage in Alaska.

If the companies were simply to nominate shipping space in open season they could end up paying $150 million to $200 million a year for that space if they were not ready to ship gas when the pipeline went online.

Not nominating space in an open season is equally unattractive: with 30 trillion cubic feet of proven reserves on the North Slope, a 4 billion cubic foot a day pipeline could be at capacity for 20 years and companies without space in the pipeline would be unable to ship gas to market.

By purchasing state royalty gas, explorers can commit to pipeline space in an open season and use that space to ship state royalty gas until they have gas of their own ready for the pipeline.

The state gains an immediate up-front bonus from the royalty gas sale and, once purchasers have their own gas to ship, the state's leases allow them to change from taking royalty in kind (the actual gas) to royalty in value (the producers sell and ship the gas and give the state the money) on six months notice.

Anadarko and AEC are partners in acreage and are interested, Sharp told the board, "in purchasing state royalty gas to backstop, if needed, any potential nominations for capacity during an open season."

"We believe," he told the board, "the state should leverage its gas volumes of tomorrow to support gas exploration projects of today. The state has no risk, as this is a natural hedge. If the pipeline does not proceed, the state would have no obligation to deliver contracted future royalty gas volumes under those circumstances."

MMS sets public meetings on five-year program

The Minerals Management Service will hold public hearings on the draft environmental impact statement for the Department of the Interior's proposed outer continental shelf oil and gas five-year program, 2002-2007.

The hearings are all scheduled from 7-9 p.m.: Anchorage, Dec. 3, Wilda Marston Theater; Soldotna, Dec. 4, Kenai Peninsula Borough Conference Room; Kotzebue, Dec. 4, Northwest Arctic Borough Assembly Room; Homer, Dec. 5, City Council Chamber, 491 E. Pioneer Ave.; Nome, Dec. 5, Northwest Campus University of Alaska; Kodiak, Dec. 7, Kodiak Island Borough Assembly Chambers; Barrow, Dec. 7, North Slope Borough Assembly Room.

MMS said it will hold a teleconferenced hearing in early January for villages that border the proposed sale areas.

Comments on the proposed five-year program will be accepted through Jan. 24.The final EIS and the proposed final program are slated for release in April.

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