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Challenging winters
Exceptionally cold conditions increase Enstar’s reliance on stored gas
Alan Bailey for Petroleum News
While residents of Southcentral Alaska shivered under the onslaught of recent abnormally cold winter conditions, Enstar Natural Gas Co., the gas utility for the region, has had to draw on its inventory of stored gas, to keep gas supplies flowing to its customers.
“January 2020 was the longest stretch of cold weather on Enstar’s system in the last 30 years,” Lindsay Hobson, Enstar director, corporate resources and communications, has told Petroleum News.
The potential for further abnormally cold winter weather is a serious concern for the utility, given that unexpectedly cold weather drives gas demand above planned levels. This year, abnormally cold weather in April caused the utility to rely heavily on its stored gas, in addition to the use of gas flowing from gas producers in the Cook Inlet basin. As a consequence of exceptionally cold weather during the week of April 5, for example, 60% of the gas supplied to consumers came from storage, Hobson said.
However, based on forecasted demand, Enstar does have sufficient gas supplies under contract to meet its expected needs through the first quarter of 2023 - the company is working on addressing an anticipated supply gap that begins to emerge in the second quarter of that year, Hobson said.
Gas storage Enstar stores substantial volumes of gas in the Cook Inlet Natural Gas Storage Alaska facility, south of Kenai on the Kenai Peninsula. The primary purpose of this storage arrangement is to provide a means for Enstar to meet peak winter demand, when demand exceeds the producers’ peak delivery capabilities. Enstar pumps gas into storage at times, particularly during the summer, when consumer gas demand is relatively low. However, the total amount of gas that the utility receives over the entire year, including gas for storage, is limited to the maximum amount of gas that the producers can supply. And that, in turn, relates to the amount of gas supply that Enstar has under contract.
Because the producers tend to produce just enough gas to meet their contractual obligations, additional gas volumes may not be easily available, if gas demand significantly exceeds planned levels, Hobson commented.
Hilcorp is largest supplier Enstar’s largest supplier, by a substantial margin, is Hilcorp Alaska LLC - Hilcorp operates most of the oil and gas fields in the Cook Inlet region. Under a gas supply agreement dating back to 2016 and extended in July last year through to March 2033, Hilcorp has committed to firm daily gas supplies ranging from 40 million cubic feet between May and October to 120 million cubic feet between December and February. Although, clearly, these supply volumes are greatest during the winter when gas demand is high, low summer demand does enable Enstar to warehouse excess produced gas in the CINGSA facility.
The Hilcorp supply agreement allows Enstar to call for some additional gas, as needed to bolster supplies and to enable Enstar to purchase more summer gas for storage in the CINGSA facility. Under a “needle peak” call arrangement, Enstar can also support winter gas demand by calling on an additional 20 million cubic feet per day over up to 25 days between November and February of each contract year. Some additional gas may also be available at the discretion of the parties to the GSA.
According to Enstar’s application to the RCA in 2020 for approval of its amended Hilcorp gas supply agreement, Hilcorp is committed to continued gas development to meet Enstar’s needs over the duration of the agreement. The application says that Enstar anticipates needing a total of 33.6 billion cubic feet per year of gas in the years 2021 to 2025, to meet gas demand in Southcentral Alaska. At the time of the application the company anticipated 25 bcf per year of Hilcorp firm gas supplies, with another 4 bcf per year to come from additional calls on Hilcorp gas. That would leave a further 4.6 bcf to come from other Cook Inlet gas producers.
Furie’s Kitchen Lights field The most significant of these other suppliers is Furie Operating Alaska, operator of the Kitchen Lights gas field, offshore in the Cook Inlet. Enstar’s RCA application indicated that the utility anticipated obtaining a little over 2 bcf of gas from Furie in calendar year 2021, with that volume declining over subsequent years.
The Kitchen Lights field, while significant in size, has suffered from operational problems, resulting in declines in contracted production volumes. In 2019 production from the field stopped for several months because of hydrate plugs in the field’s subsea pipeline and onshore processing facilities. Furie subsequently went bankrupt. HEX Cook Inlet LLC purchased Furie in July 2020 and has subsequently been moving forward with plans to re-invigorating the field. However, the latest approved amendment to Enstar’s gas supply agreement, dated April 2020 and predating the HEX purchase of Furie, shows a commitment to deliver 1.55 bcf of gas for the 12 months starting in April 2021, declining to 1.19 bcf in the following 12 months.
Other suppliers In Enstar’s 2020 RCA application the utility also indicated that it expected to obtain 270,000 cubic feet of gas in 2021from AIX Energy, operator of the Kenai Loop gas field in the northern Kenai Peninsula. However, that supply would presumably have been obtained before the termination of the utility’s contract with AIX in March of this year.
Enstar has been able to obtain a small amount of gas from BlueCrest Alaska Operating, operator of the Hansen field at Cosmopolitan in the southern Kenai Peninsula. And Enstar is currently seeking RCA approval of a gas supply agreement with Vision Resources, the new operator of the North Fork gas field in the southern Kenai Peninsula.
According to Enstar’s current tariff, the utility can obtain some gas from short term supply contracts, to fully meet its supply requirements.
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