Royalty-in-kind purchase interest

Kristen Nelson

Petroleum News

The Alaska Department of Natural Resources published a solicitation of interest at the end of August for purchase of royalty-in-kind natural gas from the Prudhoe Bay and Point Thomson units.

In a Sept. 28 letter, Lieza Wilcox, vice president, commercial and economics for the Alaska Gasline Development Corp., told DNR that AGDC is interested in purchasing the state’s RIK gas.

She said AGDC was in discussion with DNR on terms of the purchase, and “proposes to purchase the entire royalty in kind share of gas available from PBU and PTU for a major gas sale.” “AGDC would also purchase any PBU or PTU gas made available by DNR if tendered as tax-as-gas by the PBU and PTU leaseholders.”

Under the tax-as-gas option the state would accept payment of taxes in molecules rather than in dollars.

Wilcox said the proposed purchase would begin during commissioning of the Alaska LNG System, include a build-up period and then 20 years of plateau purchase, followed by decline as production from the two fields declines, with the total duration estimated at 25-30 years.

AGDC would reserve a portion of the natural gas, up to 500 million cubic feet per day, to meet in-state needs, she said.

The gas would be delivered to AGDC at the unit boundaries and transported via pipeline to a gas treatment plant at Prudhoe Bay and would then enter a pipeline for delivery to in-state markets, or an LNG plant near Nikiski.

Wilcox said gas not sold into in-state markets would be liquified and transported to other markets as LNG. - KRISTEN NELSON