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Enstar, Buccaneer strike a deal

Utility to buy gas from Kenai well for storage facility

Posted: August 16, 2011 - 8:00am  |  Updated: August 16, 2011 - 8:49am
Photo by M. Scott Moon
Work continues on the Cook Inlet Natural Gas Storage Alaska’s facility at the corner of Bridge Access Road and Beaver Loop.

A Sunday announcement suggested progress for natural gas development on the central Kenai Peninsula.

Buccaneer Energy announced Sunday — Monday in Australia, where the company is headquartered — that Buccaneer Alaska will sell gas from its Kenai Loop well to Enstar.

Enstar will be storing some of that gas at the Cook Inlet Natural Gas Storage facility, a project of those two entities’ parent company, Semco Energy. This is the first supplier announced for the storage project. Among the future customers of the storage project is Alaska Electric and Energy Cooperative, a subsidiary of local utility Homer Electric Association.

Enstar supplies natural gas to residential and commercial customers throughout the Kenai Peninsula and the rest of Southcentral Alaska.

Recent projections have shown a shortfall in the coming winters, with more demand for natural gas than area producers can supply.

Buccaneer spokesman Dean Gallegos said in the statement that this contract would help alleviate that shortfall.

“This gas contract represents the first such contract executed by Enstar to supply their reserve capacity in the new CINGSA facility,” Gallegos said. “Importantly, it provides Buccaneer with cash flow certainty in the near term, which will under pin the development of the Kenai Loop field.”

Kenai Loop is near WalMart, and is adjacent to Marathon’s Cannery Loop development site.

The location means its relatively easy to bring gas to market, Buccaneer Alaska representative Mark Landt said last week.

“We’re close to infrastructure,” Landt said.

The gas sales agreement is dependent on approval from the Regulatory Commission of Alaska. According to that body’s website, a decision is due by Sept. 26.

Sales can begin once the commission approves the contract, but Buccaneer said they will likely start in December, once additional work at the Kenai Loop site is completed.

According to Enstar’s filing with the regulatory commission, that construction includes a pipeline extension to connect the Kenai Loop site to Enstar’s transmission and distribution system.

Initial sales will be done on a day-to-day basis, Buccaneer said in the announcement. That means the company will sell what is available in a daily auction to help meet peaking demand for gas. Last winter, Enstar purchased about five million cubic feet every day, at an average price of $9 per thousand cubic feet.

Come April, Buccaneer expects to sell its gas for about $5.96 per thousand cubic feet. That’s when Enstar’s parent company, Semco Energy, expects the new natural gas storage facility to come online. The storage facility is under construction near Kenai. CINGSA will help meet fluctuating demand by storing gas in a mostly-depeleted field in the summer so that gas can be extracted all winter.

The gas price will vary seasonally. From December through March, the gas will sell for about a quarter more, at $6.24 per thousand cubic feet.

Regardless of the season, the contract specifies that Enstar is responsible for transportation costs once the gas is at an agreed upon point, and will cover the cost of the pipeline tariff.

During the first six months of the firm contract, the contract says that Buccaneer will deliver between 5 and 15 million cubic feet per day. The first 5 million cubic feet is guaranteed; beyond that, Buccaneer can sell up to 10 million cubic feet per day of test gas. After six months, Buccaneer has the option to increase to a guaranteed 15 million cubic feet per day. The firm contract begins when the CINGSA facility comes online, which is expected to happen in April.

Buccaneer said in its statement that the step-up delivery lowers the risk for Buccaneer, and allows the company to continue its exploration plans.

Landt said last week Buccaneer plans to spud an additional well in the Kenai Loop this month, with more to follow in the next six to twelve months. The contract calls for the second well this November, and a third by Nov. 2013.

In the longer-term, Buccaneer is also working on both oil and gas prospects in Cook Inlet, which could supply even more natural gas to the local market.

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suzannerene
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suzannerene 08/17/11 - 01:25 am
0
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What does this mean for the

What does this mean for the locals-more jobs...less prices?more people in the community that are hired out of state or even out of country?

spwright
1376
Points
spwright 08/17/11 - 07:36 am
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Gas Land

Wed. 8/17/11
I really hope that the Kenai Residents that live near this Natural Gas Project will Make the Time to have their Drinking Water Tested & be certain that drinking water has not been
contaminated & is Safe to Drink.

Watch the HBO Documentary titled : "Gas Land" & what has happened whereever Natural Gas Wells have been drilled in the Lower 48. That will Get Your Immediate Attention.

TEST YOUR DRINKING WATER

SPW in Soldotna

kenai_kid
222
Points
kenai_kid 08/17/11 - 09:56 am
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Facts, research and information

Before one draws any conclusions on gas development, drilling or drilling methods, it behooves one to check the facts, do some research and become fully informed:

One quick google for "Gasland Facts" found the following:

http://www.nytimes.com/gwire/2011/02/24/24greenwire-groundtruthing-acade...

And another.

http://www.commonwealthfoundation.org/policyblog/detail/gasland-debunked

There were many more sources.

FACTS:
Fracking has been done on Cannery Loop, Swanson River, and almost all of the other fields on the peninsula.

Nearly 6 TRILLION cubic feet of gas has been extracted locally in the past 55 years.

Oil and gas on the Peninsula is responsible for the majority of the economic and social development locally.

Oil and gas development is not without risk. However, we as individuals have some control through consumption. The less that is consumed, the less that is demanded, the less drilling required.

There is little or no evidence of water table contamination on the Kenai as a result of fracturing or drilling.

Shallow gas in Wyoming, California, Colorado, New Mexico, Louisianna, Alabama, Texas, Oklahoma and New York has contaminated water wells ... for years prior to any form of hydrocarbon development through natural occurring seeps.

Grant it, Gasland holds great points and SOME facts. But there are also some severe misrepresentations and mis-truths and distortions as well. Use multilple sources of information prior to drawing a conclusion. Do some research, get some facts and become informed.

spwright
1376
Points
spwright 08/17/11 - 10:40 am
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Reply to Kenai Kid

Wed. 8/17/11
All of what You submitted could be True BUT If I Lived any where near a Natural Gas Well I would make the time to have my Drinking Water Supply Tested & make certain that water is SAFE for my family.

For some unknown reason, I don't have much Trust or Faith
in Oil Corporations such as B P or Exxon.
Those Corporations are not required to document & explain what chemicals are used during the "Fracking Process" & they have refused to explain what chemicals are used.

Most Important Bottom Line :
Get Your Drinking Water Tested.

SPW "Airborne"

kenai_kid
222
Points
kenai_kid 08/17/11 - 11:40 am
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Mis-information

The drinking water from wells in the immediate area of drilling are tested regularily. For those wells on Marathon Road and Cannery loop, the testing is done by the city as all are in close proximity to city water sources. Other than the naturally occurring arsenic (higher than the Federal limits), and chlorine (a known carcinogen http://www.pure-earth.com/chlorine.html) the water has proven to be safe.
As for what is injected into the wells for fracturing, the slurry consists of 98% sand and water. The chemicals used MUST be reported and the amount used must also be reported as per EPA, the Interior Department and seven other Federal and state agencies. However, the percentage of chemical to water and sand mix does not have to be reported as it is considered proprietary information. Again, the amount of any chemical must be reported as per The Emergency Planning and Community Right-to-Know Act (EPCRA). Please see: http://fracfocus.org/chemical-use/chemicals-public-disclosure
Another source closer to home would be: http://www.touchngo.com/lglcntr/akstats/statutes/title31/chapter05/secti...
These are the Alaska Statutes concerning not only the injection of fracturing materials and chemicals, but the disposal of field generated hazardous waste.

jake
63
Points
jake 08/17/11 - 04:38 pm
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New Subject

Curious about the cost of home heating. Will the cost go down? or up? Don't see much from Enstar about cost to the customer, just cost to them. "Last winter, Enstar purchased about five million cubic feet every day, at an average price of $9 per thousand cubic feet." "Come April, Buccaneer expects to sell its gas for about $5.96 per thousand cubic feet." That's a $3.04 per thousand cubic feet savings. "From December through March, the gas will sell for about a quarter more, at $6.24 per thousand cubic feet." That's a $2.76 per thousand cubic feet savings. Will this saving be passes on to the home owners or will other charges "Pop Up" and our heating bills stay, or rise, in the coming years. My money is they will continue to rise.

Allen
585
Points
Allen 08/17/11 - 05:30 pm
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City Testing for Pollutants?

You are joking about the City of Kenai testing on Marathon Road and Cannery Loop for oil/gas industry pollutants, right? If you think that is happening, prove it.

spwright
1376
Points
spwright 08/17/11 - 05:57 pm
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"Show Me" 8/17/11

Obviously "Kenai-Kid" is a advocate for the Oil & Gas Industry
& has many sources to get information. & He is representing that industry very well.

I'm from Missouri, The Show-Me State & I tend to believe What I See & have visual Proof.

When I witness a Rancher in Montana turn on his kitchen faucet & the water flows for a few seconds then you can see
vapors flowing from the faucet also. Then this Rancher uses a BIC Lighter to IGNITE the VAPORS coming from the kitchen faucet ! That makes a Believer outta Me !
Then the same Rancher goes outside to his yard & there are
water puddles with vapors. He puts a paper cone over the
puddles then uses the BIC Lighter again to IGNITE the VAPORS coming from the puddles in his yard. Physical Proof of Something very Wrong. Then the Rancher points to the
Natural Gas Well being drilled across the gravel road from his
property. Then the Rancher states: None of these problems existed before the Natural Gas Wells arrived.

Any one that will make the time to view the documentary
"Gas Land" will witness the same thing.

Once again, the Most Important Issue :
GET YOUR DRINKING WATER TESTED.

SPW "Airborne"

kenai_kid
222
Points
kenai_kid 08/17/11 - 09:20 pm
0
0
Allen If it is Proof you want ...

If you want proof that Kenai tests its water for pollutants, look no further than your mail box annually. In case that is one of the pieces of paper that gets disguarded as junk mail, here is a copy of the 2010 report for your review. http://www.ci.kenai.ak.us/publicworks/Water_Quality_Report.pdf .
In addition, this link will take you to the Ak DNR water well test results in cojunction with the USGS. http://www.dggs.dnr.state.ak.us/webpubs/usgs/of/text/of-0480.PDF The results date from roughly 1957 to present at locations from Sterling and Swanson River to Funny River and North Road as well as Kenai and Soldotna. It includes private as well as public and industrial wells. As for testing for pollutants on Marathon Road or Cannery Loop, please quote me verbatim where I said that the water was tested "at" those locations. My meaning and inference to "immediate area" was that water was tested in the proximity of those drilling locations as the threat to the drinking water would be in the aquifer. Since the aquifer in Kenai does not differ significantly in depth (most wells private and public are in the range of 80' but as shallow as 30'), the said gas fields on Cannery Loop, Bridge Access and Marathon Road would all impact the same aquifer. Beaver Loop water well lies within 2.8 miles (14,478 feet) on Cannery Loop gas field and the depth of those gas wells is anywhere from 9,000 to 11,000 feet total depth with a reach of about 3500 feet horizontal. I guess that inference was my mistake.
As for being an "advocate" of the oil and gas industry ... I wouldn't say that for certain as I have my fair share of gripes with the industry and the way it conducts business. However, I am an advocate of reason, information and facts. spw's opening blog stated: "Watch the HBO Documentary titled : "Gas Land" & what has happened whereever Natural Gas Wells have been drilled in the Lower 48." I felt that was to general of a statement and not true ("everywhere?") and needed redress. If we were to believe everything that was presented as a "documentary", I would now believe the moon landing was a staged event, FDR intentionally allowed the attack on Pearl Harbor and the Holocaust never have happened. If we trusted everything that was told us, Columbus (or some other discoverer) would never have risked falling off the edge of the earth, the sun would still revolve around the earth and heaven forbid we believed everything Michael Moore ever directed and produced. SPW, you've surely heard of or seen these documentaries. Did you believe any or all of them?
We live in the information age. Why is it we limit the source of that information what information we absorb? If we did use the information we had, I wouldn't have to prove anything to Allen, he could instead prove me wrong!
SPW, thank you again for the spirited debate and I hope you are recovering well from your surgery.

kenai_kid
222
Points
kenai_kid 08/17/11 - 09:28 pm
0
0
@ Jake

Good point on the gas price, however, the price of gas is tied directly to the Henry Hub and NOLA price. Prior to approximately 2000 Ak gas was not tied to this market. The Oil and Gas industry lobbied for the Henry Hub and NOLA indexing saying it would stimulate exploratory drilling in the inlet. So we are no longer a "stranded gas" state as our gas prices are tied directly to the lower 48 price. However, the transporter of the gas can charge more (with the permission of RCA) to move that gas to market (your home) and stay with the cost of the indices.

jake
63
Points
jake 08/18/11 - 06:57 am
0
0
Kenai_Kid/Henry Hub

The use of the Henry Hub prices was the rational for the early rounds of raising the price of natural gas from Unocal in Southcentral Alaska. When the "Hub" prices began to fall in the last five years or so, Chevron who bought out Unocal, stopped using it. Currently the price from natural gas weekly update is:

"Natural gas prices fell across the board this week, likely in response to cooling temperatures as well as weak economic news. The Henry Hub spot price fell 17 cents from $4.26 per million Btu (MMBtu) last Wednesday, August 3, to $4.09 per MMBtu yesterday, August 10. "

And if one researchs the hub prices for the last five years they will find the prices much lower than what Chevron is charging Enstar

kenai_kid
222
Points
kenai_kid 08/18/11 - 09:15 am
0
0
Jake/Natural Gas Weekly

Thanks for the info Jake. NGW has a lot of info pertaining to the consumer price of natural gas. For more info check this site: http://www.eia.gov/energyexplained/index.cfm?page=natural_gas_prices

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