Alaska is soliciting bids for 400 million cubic feet per day, or roughly 80 percent of its royalty gas, from the estimated 35 trillion cubic feet of gas on the North Slope.
The sale is contingent on a pipeline being available to carry gas to market in the continental United States. Three North Slope producers, BP Exploration (Alaska) Inc., ExxonMobil Production Co. and Phillips Alaska Inc., are engaged in feasibility and engineering studies for a large-diameter pipeline from the North Slope.
The move also aims to ensure that independent companies now exploring for gas on the North Slope, who are not among the companies now planning the pipeline, will have access to the new gas transportation system once its built.
A second goal is to use Alaska's ability take its royalty gas in-kind as a tool to encourage firms that will own the gas pipeline to build extra capacity or plan for an early expansion of the system. Currently, the three producers and an independent pipeline consortium are studying the proposed project.
Under terms of state oil and gas leases, the state can either sell its one-eighth royalty in-value to producers or take the gas in-kind, selling it to others. Over the years, much of the state's royalty oil from North Slope crude production has been taken in-kind and sold to refiners in Alaska.
Proposals for buying royalty gas are due Jan. 31, according to officials at Alaska's Division of Oil and Gas. The state expects to select the winning bidders Feb. 1.
