New year's crystal ball not clear on gas prices.

Posted: Tuesday, December 30, 2003

There was a time in the Cook Inlet when an exploration well found gas, it was closed in and considered a dry hole. Today the major interest in lease sales for the Inlet and Kenai Peninsula is to find additional natural gas reserves.

Commercial discoveries of gas in the Ninilchik and Happy Valley areas by Marathon and Unocal have been the best economic news the Borough has had in the last year amid diminishing supplies, platform closures and layoffs in the industry. However, according to Will Nebesky, Commercial Analyst for the Alaska Department of Natural Resources, those discoveries will not stem the steadily rising prices for Cook Inlet natural gas in the foreseeable future. "We try to keep our finger on the pulse of what industry is doing as well as the latest information from the Department of Energy in order to understand what's happening with markets for oil and gas. While Alaska is somewhat isolated our pricing is being affected by supply & demand locally as well as in the lower 48 and somewhat hinges on outside pricing due to the Henry Hub formula," Nebesky told the Kenai Chapter of the Alliance recently.

Henry Hub is a 36-month moving average of a pricing index used in the lower 48 to establish gas prices and is the method of pricing to be used in a new contract starting in January between Unocal and Enstar. Projections for that moving average show an increase in wholesale gas drifting between $.75 cents per thousand cubic feet through the end of the decade, according to Nebesky. Enstar has applied for a tariff revision to increase what it charges its commercial and residential customers in Alaska. The good news about the price increase is that it will continue to stimulate exploration and production drilling in the Cook Inlet region.

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