State proposes sale of oil to Petro Star

Alaska’s Division of Oil and Gas is seeking comments on a best interest finding, proposing the sale of state royalty oil to Petro Star Inc. The oil would be used as a feedstock for Petro Star refineries in North Pole and Valdez. The division requires comments by Aug. 29.

The proposal involves two separate oil sale contracts which together encompass a period of five years, probably starting on Dec. 1 this year. The first contract would run until Nov. 30, 2017, with the second contract running from Dec. 1, 2017, to Nov. 30, 2021.

Deliveries under the first contract would range from 18,000 to 23,500 barrels per day. Under the second contract, deliveries would decline over the four-year contract duration, with a commitment of 16,400 to 20,500 barrels per day in the first year; 13,200 to 16,500 barrels per day in the second year; 10,800 to 13,500 barrels per day in the third year; and 8,400 to 10,500 barrels per day in the fourth year.

Pricing in the contracts is based on a formula that uses accepted industry price reporting services and resembles the formula used to calculate the royalties paid to the state by North Slope oil producers, the division says.

The contracts have been formed under the terms of state laws that allow the state to take royalty payments as physical oil, in lieu of cash. The state can then sell the royalty oil in the oil market, with the state typically selling its royalty oil to in-state oil refiners.

- ALAN BAILEY