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AIDEA completes Pentex purchase
On Sept. 30 the Alaska Industrial Development and Export Authority completed its purchase of Pentex Alaska Natural Gas Co. LLC. Closure of the purchase, a couple of weeks earlier than expected, means that AIDEA now owns Fairbanks Natural Gas, one of two gas utilities in the city of Fairbanks.
The purchase comes as part of the Interior Energy Project, a project to bring affordable energy to Fairbanks and the surrounding Interior.
Although the purpose of the Pentex purchase is the acquisition of Fairbanks Natural Gas, the purchase has also given AIDEA ownership of a small liquefied natural gas facility near Port MacKenzie on the Cook Inlet. AIDEA had planned to sell this facility to Harvest Alaska LLC, an affiliate of Hilcorp Alaska, a Cook Inlet gas producer. In early August the state attorney general refused to approve the sale of the facility to Harvest but AIDEA decided to continue with its Pentex purchase, as planned.
AIDEA has not stated how it now intends to deal with the LNG plant, given the attorney general’s decision. The agency has planned to recoup part of what it paid for Pentex through the sale of the plant. The plant currently produces LNG for delivery to Fairbanks Natural Gas, but the plan for the Interior Energy Project envisages a major increase in the LNG supply through a yet-to-be determined supply chain that is currently under negotiation.
The eventual objective is to deliver natural gas to Fairbanks residents at a price of $15 or less per thousand cubic feet.
Gas supply chain In early June the Interior Energy Project team issued a request for proposals for a gas supply chain to Fairbanks. The team has selected a shortlist of five businesses that have submitted proposals. In conjunction with Fairbanks gas and power utilities, the team is now negotiating with the businesses, with the intent that each finalist will put forward its best and final offer for the Fairbanks gas supply. The Interior Energy Project team will then select a single option for submission to the AIDEA board for approval in December. Options under consideration include concepts for an LNG plant on the North Slope, an LNG plant in the Cook Inlet region and the import of LNG from Canada, with LNG being transported to Fairbanks by truck or by rail.
Responses to a request to Cook Inlet gas producers for information regarding potential Cook Inlet gas supplies are also being considered, to determine whether a supply of Cook Inlet gas for Fairbanks would be feasible both in terms of quantity and cost. And the two Fairbanks gas utilities, Fairbanks Natural Gas and the Interior Gas Utility, have been moving ahead with the construction of a greatly expanded gas distribution pipeline network in Fairbanks.
AIDEA thinks that initially it can reduce the cost of gas for Fairbanks residents through the agency’s ownership of Fairbanks Natural Gas because the agency’s cost of doing business is lower than that of a privately owned utility - the agency’s cost of capital is relatively low and the agency will not incur the regulatory costs of a regulated utility. However, AIDEA’s eventual objective is to achieve operational efficiencies and economies of scale through the consolidation of the two Fairbanks gas utilities, with AIDEA then spinning off the consolidated utility to some third party business.
- ALAN BAILEY
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