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Hilcorp says it can fill Southcentral gas needs through 2017

Posted: April 25, 2013 - 8:37pm  |  Updated: April 27, 2013 - 4:27pm

Hilcorp Energy has told local utilities that it can meet their natural gas needs through 2017, company spokeswoman Lori Nelson said April 24. This would eliminate the utilities’ need to import gas until after 2017.

The utilities had been concerned that imports of liquefied natural gas or compressed natural gas would be needed as early as 2015.

The assurances were given to utilities by Hilcorp in meetings held April 10, Nelson said. This followed a survey Hilcorp made of regional gas needs earlier this spring and verifications the company had done on producing properties acquired in January from Marathon Oil Co.

A consent decree negotiated by the Alaska Department of Law involving Hilcorp’s acquisition of Marathon’s assets was approved by a state court in January and the company was able to complete the purchase and take control of Marathon’s gas fields on Jan. 31.

Shortly after, Hilcorp asked the utilities what their needs would be over five years, got the information back and completed a verification that the Marathon properties acquired would be able to meet that demand, Nelson said.

“We have been able to increase production of both oil and gas from our Cook Inlet properties, but we made a big push on gas after taking control of the Marathon fields,” Nelson said.

“We were particularly pleased at the response at the Kenai gas field,” which is a large gas field and was formerly Marathon-owned. “There were a lot of immediate quick-turnaround gas projects we could do. In some cases it was as simple as turning on wells that had been turned off,” Nelson said.

Hilcorp is now discussing gas sales contracts with the utilities. Any gas sales will have to be approved by the Regulatory Commission of Alaska, she said. The price of gas will also be governed by the consent decree, which will limit the price to $6.60 per thousand cubic feet, or mcf, in 2013; $6.86 per mcf in 2014; $7.13 per mcf for 2015; $7.42 per mcf for 2016 and $7.72 per mcf for 2017.

After 2017 the price caps agreed to in the consent decree will end. Prior to that, however, there are provisions for higher prices for gas supplied for an emergency or other special condition, Nelson said.

The Southcentral utilities in the meetings with Hilcorp included Enstar Natural Gas Co., Chugach Electric Association, Anchorage’s city-owned Municipal Light and Power; Matanuska Electric Association and Homer Electric Association.

Fairbanks Natural Gas, the small gas utility serving Fairbanks with liquefied natural gas trucked from a small plant in the Matanuska-Susitna Borough, was also solicited for its needs, Nelson said.

Chugach and ML&P have much of their gas needs meet through 2016 but Enstar Natural Gas was facing big gaps in the gas supplies it needs to have under contract. Hilcorp’s assurances were also good news for Matanuska Electric Association, which will be able to fuel the new power plant the utility is building at Eklutna, north of Anchorage.

MEA’s plant is duel-fuel and can run on fuel oil as well as gas, but officials with the utility had been concerned earlier about obtaining gas and the possibility of starting the Eklutna plant with fuel oil.

Nelson did not have the precise quantities that might be involved but said the Southcentral regional gas demand is about 90 billion cubic feet per year.

“We will be able to supply 50 billion cubic feet annually over the next four years,” into the regional market, she said.

Correction: The original version said Hilcorp could meet the needs for Southcentral through 2016. It has been corrected to 2017.

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