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Williams Alaska gets short-term contract for state oil from North Slope
Allen Baker Petroleum News contributing writer
The state of Alaska and Williams Alaska Petroleum have signed a three-month contract for supplying state royalty oil from the North Slope to the Williams refinery in North Pole, near Fairbanks.
Longer-term supply agreements between Williams and the state expire at the end of this year. The state has to tell producers 90 days ahead of time how much royalty oil it wants in a given month, so the Oct. 1 agreement came just a day ahead of that deadline.
The deal comes as parallel negotiations are under way between Williams and Flint Hills Resources LLC on the one hand, and the state and Flint Hills on the other.
Until a supply agreement is hammered out with the state, Flint Hills is unlikely to close its potential purchase of the refinery, and possibly other Williams assets in Alaska.
And according to the interim supply agreement between the state and Williams, “significant differences remain concerning material terms of that potential contract” for the royalty oil. Short-term agreement supplies refinery In the short-term agreement, Williams will get most of the oil it needs to power the North Pole refinery. The deal calls for Williams to receive a maximum of 77,000 barrels of state oil daily, with a minimum of 56,000 barrels daily. The number would be averaged over each individual month.
For Williams, the flow through the refinery can vary significantly depending on market conditions. “There are times when we could be getting close to 100 percent from the state,” said Jeff Cook of Williams. On average, the state should provide 85 to 90 percent of Williams’ total, with the remainder from “another producer,” according to Cook.
However, the agreement with the state limits Williams to 85 percent of the state’s royalty oil in any given month, and 95 percent of the royalty oil from any single unit on the North Slope.
Williams put its Alaska properties on the block in June 2002. In addition to the refinery, Williams has a 3 percent stake in the trans-Alaska oil pipeline, product terminals in Anchorage and Fairbanks, and a chain of convenience stores.
The potential purchaser, Flint Hills Resources, is a wholly owned subsidiary of privately owned Koch Industries. Alaska Gov. Frank Murkowski announced Aug. 4 that the state had begun negotiations with Flint Hills on a contract for sale of royalty oil.
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