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Availability of gas, not cost, the issue, says Pfoff
Kristen Nelson Petroleum News
Scott Pfoff, president of both Aurora Gas and Aurora Power, has been left sitting on the sidelines as the Regulatory Commission of Alaska discusses the gas supply problems of Fairbanks Natural Gas, which uses liquefied natural gas from Cook Inlet to serve some 800 Fairbanks customers. That gas has, in the past, been supplied by Aurora Power.
Pfoff called Petroleum News to discuss a story in the Oct. 1 issue which, referring to RCA documents, said the issue of gas for FNG was an economic one.
Not so, Pfoff said.
“Aurora Power did not tell Fairbanks (Natural Gas) we were not going to sell them gas because it was not economic.
“We told them we’re not going to sell them gas because we didn’t have the gas to sell them.”
There are a lot of commercial and contractual issues involved, he said, “but the real problem that’s driving all of the problems is the lack of reserves and deliverability as a result of lack of investment and exploration” in Cook Inlet.
Aurora Gas got involved because Aurora Power, a middleman which buys and sells gas but has no production of its own, ran out of gas to sell FNG.
Pfoff said Aurora Power started warning FNG in 2004 “that there was a supply problem coming.” A year ago Aurora Power notified FNG that it could no longer supply its gas, and stopped supplying gas Nov. 1, 2005.
“Now this is where the confusion comes in,” Pfoff said: Aurora Gas stepped in with a series of short-term gas contracts “and basically supplied them as long as we could.”
Two separate companies Aurora Gas couldn’t supply FNG beyond this September, and Enstar agreed in late September to provide gas temporarily. In the course of RCA hearings on the short-term Enstar contract, Aurora Power and Aurora Gas were lumped together as “Aurora.”
Pfoff said they are “two completely separate companies, with completely different ownership and they engage in two very different types of business activities.”
Aurora Power, established in 1994, “is a natural gas marketing company. We buy and sell natural gas.” Aurora Power is a middleman, and that, he said requires excess deliverability. In 1994, Pfoff said, “there was basically plenty of gas.”
Aurora Gas was formed by Aurora Power and Orion Resources in 2000 to explore for gas in Cook Inlet. Ed Jones and Andy Clifford, of Orion, provided “the technical expertise that we didn’t have then in Aurora Power.”
Under the original ownership Aurora Gas acquired the Nicolai Creek gas field and brought it on production.
The company then went looking for additional capital, and found it in 2002 with Kaiser Francis Oil Co. of Tulsa, Okla.
Kaiser Francis has invested $50 million since then, and by virtue of that equity infusion today owns about 93 percent of Aurora Gas; Aurora Power owns some 5 percent.
“Aurora Power has a small ownership in Aurora Gas, but Aurora Gas has no ownership or economic interest whatsoever in Aurora Power,” Pfoff said.
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