The Alaska Division of Oil and Gas has published a non-binding solicitation of interest to gauge whether commercial refiners or other parties would like to acquire some of the state’s North Slope royalty-in-kind, RIK, oil.
Division Director Tom Stokes said in the Aug. 26 solicitation that the state’s current RIK contracts end in the third and fourth quarters of 2022.
The state has received inquiries from potential buyers for multiyear RIK contracts, and state statutes require competitive bid sales for the state’s royalty oil except in cases when the Department of Natural Resources commissioner “determines that the best interest of the state does not require competitive bidding or that no competition exists.”
“If there is substantial interest expressed by more than one potential buyer for RIK oil, DNR may issue an Invitation to Bid and conduct a sealed-bid auction for the RIK oil consequently,” the solicitation says.
Written responses are due Sept. 30.
(See state’s Aug. 26 solicitation of interest in PDF version of this issue of Petroleum News online at www.PetroleumNews.com.)
Multiyear RIK sales agreements require a review by the Alaska Royalty Oil and Gas Development Advisory Board and approval by the state Legislature.
The contract will supply RIK oil for at lease three years, the solicitation said.
One-year contracts
In May DNR published a final best interest finding and determination for the sale of ANS RIK oil to Marathon Petroleum Supply and Trading Co. for a negotiated one-year contract for a portion of the state’s ANS RIK oil.
While multiyear contracts require board review and legislative approval, contracts designed to relieve market conditions are not required to go through that process if they are for one year or less.
The one-year Marathon contract covered between 10,000 and 15,000 barrels per day between Aug. 1, 2021, and July 31, 2022.
In approving the one-year contract DNR Commissioner Corri Feige said the standard approval process takes time, “and here, could means months without royalty oil being delivered to the Nikiski refinery.”
The May finding said the state has a long history of selling North Slope RIK to the Marathon refinery, having supplied ANS crude to that facility between July 1980 and January 1982, between January 1983 and December 1998 and since February 2014.
The state also asked for expressions of interest from companies interested in bidding on the state’s ANS RIK crude oil last September.
At that time the state had a five-year contract with Tesoro Refining and Marketing Co. which began in 2016 (Tesoro changed its name to Andeavor in 2017 and merged with Marathon Petroleum in 2018) and a four-year contract with Petro Star Inc. which began in 2017, although the state’s Petro Star contract began with a one-year contract effective Jan. 1, 2017.
From November 1979 through December 2020 the state disposed of 965 million barrels of oil through RIK sales, approximately 45% of its North Slope royalty oil.
There are five refineries in the state, with three producing refined petroleum products (Marathon’s Kenai refinery, Petro Star’s North Pole refinery and Petro Star’s Valdez refinery) and small topping plants on the North Slope operated by Hilcorp and ConocoPhillips.
