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NorthStar, Enstar strike gas deal; calls for pipeline to Homer
Kristen Nelson Petroleum News editor-in-chief
Enstar Natural Gas Co. has signed a gas supply contract with NorthStar Energy Group, the operator of the North Fork gas field west of Anchor Point on the southern Kenai Peninsula, and plans to provide natural gas service to Homer via a new pipeline that will be built by both companies.
Enstar filed a request with the Regulatory Commission of Alaska Aug. 8 for approval of the 20-year gas supply contract and for approval of a proposed tariff. The company said in an Aug. 18 statement that in addition to commission approval, other requirements for it to start project construction include: successful drilling of a second natural gas production well by NorthStar Energy.
NorthStar Energy will build an eight-mile pipeline from its leases to Anchor Point, and Enstar will build a pipeline from Anchor Point to Homer, and a distribution system to provide natural gas to Homer.
The commission said the gas price will be based on a 36-month daily average of the Henry Hub natural gas futures with a floor price of $3 per thousand cubic feet adjusted for one-half of inflation plus applicable taxes and transportation fees. Homer customers would pay a line-extension surcharge of $1 per mcf to cover pipeline costs. NorthStar hopes to build north Larry Snead, manager of land and contracts for NorthStar Energy, told Petroleum News Aug. 19 that the “most exciting thing about it for us is that as a part of that agreement we will be building a line from the North Fork field to Anchor Point.”
Enstar will take the gas for delivery at Anchor Point, he said.
“But building a line to Anchor Point allows us the opportunity to build a line north to hook up with terminus of KKPL (the new Kenai Kachemak Pipeline between Ninilchik and Kenai). It is our intent to pursue that.”
Snead said the line north from Anchor Point would hook up gas from the southern peninsula to points north, but would also provide access to other sources of supply for residents of the southern peninsula. Commission is first Dan Dieckgraeff, Enstar’s manager of finance and rates, told Petroleum News Aug. 19 that it will probably take a year and a half to two years to begin delivering gas.
“First of all the commission has to approve the contract and the proposed rate,” he said, a process which could take six months to a year.
Then NorthStar has to drill at least one additional well to ensure reserves and deliverability of natural gas, and then an independent registered engineering firm has to certify the reserves, Dieckgraeff said. Then both companies have to build pipelines, NorthStar the eight-mile line to Anchor Point and Enstar the 10 to 11 mile line to Homer. Enstar also has to build the Homer distribution line.
At the end of three years of service Enstar expects to be serving 1,500 customers in Homer, he said. The 10-11 mile four-inch pipeline to Homer will cost about $3.5 million.
Hooking up customers to a distribution system is nothing new for Enstar, Dieckgraeff said: the company is currently adding 2,500 to 3,000 customers a year in the Anchorage, Matanuska-Susitna and Kenai-Soldotna areas, so adding 1,500 customers over a three-year period won’t be a problem. NorthStar wants to move gas north NorthStar became operator of the North Fork field when it purchased Gas-Pro Alaska in 2000. The gas field was discovered by Standard Oil of California in 1965, NorthStar said in public comments to the Regulatory Commission of Alaska on the Kenai-Nikiski Pipeline, but the well at the field has been shut in since that time because there was no way to move the gas to market.
Homer “is too small a market to justify development of a single well,” Northstar told the commission, but Enstar wants a second well to ensure a reliable source of natural gas for Homer.
But, NorthStar said, with construction of the Kenai Kachemak Pipeline, there is “the possibility that North Fork gas could eventually be sold to the entire Cook Inlet market, not just Homer. Based on this prospect and other market conditions, such as higher natural gas prices and increased demand, Northstar plans, as part of its ongoing exploration and development program on the Kenai Peninsula, to drill a second well at the North Fork field.”
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