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Marathon, CINGSA resolve gas supply dispute

Posted: August 28, 2012 - 8:35am

Marathon Oil and Cook Inlet Natural Gas Storage Alaska resolved a contract dispute that had threatened gas supplies for a new gas storage facility in Alaska, the companies announced late Friday.

CINGSA, which operates the facility behalf of utility customers, said the dispute over a 2011 contract with Marathon had left it short of “pad” gas needed to pressurize the reservoir so that gas can be withdrawn this winter at rates customers need.

In an Aug. 13 letter to the Regulatory Commission of Alaska, CINGSA said it believed the gas had been sold to export markets for higher prices.

Marathon said there was no breach of the gas sales agreement, but that the company would make additional gas available to CINGSA.

“I’m pleased that Marathon is able to make available additional supply from our storage,” from a Marathon-owned storage facility in the Kenai gas field that is nearby, said Wade Hutchings, Marathon’s Alaska asset manager.

Marathon has already begun transferring gas to CINGSA, Hutchings said in the statement.

CINGSA has a capacity to store 11 billion cubic feet of gas and is owned by Semco Energy and MidAmerican Energy Holdings. Semco subsidiary Enstar Natural Gas, the gas utility serving Southcentral Alaska, is one of three utility customers that will store gas in the new facility. Other customers are Chugach Electric Association, the state’s largest electric utility, and Municipal Light & Power, Anchorage’s city-owned utility.

Gas producing fields in Southcentral Alaska are declining and can no longer supply enough gas on a daily basis at peak demand during cold weather. CINGSA built the storage facility to allow utilities to store gas for withdrawal in winter.

CINGSA was 2 billion cubic feet of gas short of 7 billion cubic feet needed for pad gas by the winter, but the resolution of the dispute with Marathon will now assure that supply.

“We appreciate Marathon’s offer to sell additional gas volumes that help CINGSA meet our ‘base gas’ requirements, said Colleen Starring, vice president of CINGSA.

“Given the nature of the two companies’ storage facilities, these gas transfers will result in a net increase in gas deliverability for the winter peak demand period thus increasing confidence in meeting winter peak energy needs this year,” Starring said.

She is also president of Enstar Natural Gas.

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