Enstar inks supply deal with new Inlet entrant

Prices for long-term supplies of natural gas from Cook Inlet remain high relative to much of the country but are inching downward based on the latest in a series of recently signed public contracts.

Enstar Natural Gas Co. filed a contract with the Regulatory Commission of Alaska containing a starting price of $7.30 per thousand cubic feet, or mcf, of natural gas with Vision Resources LLC, the new owners of the North Fork Unit on the Kenai Peninsula. The RCA reviews and rules on supply contracts for regulated utilities.

While the five-year gas sale and purchase agreement covers nearly 3 percent — about 1 billion cubic feet, or bcf, of gas per year — of the Southcentral gas utility’s annual demand, the starting price is also 3 percent less than the initial rate of $7.55 per mcf Enstar agreed to in a contract for the vast majority of its gas needs last May.

The starting price in the Enstar-Hilcorp deal, which amended and extended an existing contract, is also 7 percent less than the utility and producer had originally agreed to in their prior contract.

Hilcorp Alaska, the dominant gas producer in Cook Inlet, also inked a contract approved by the Fairbanks area Interior Gas Utility in mid-January with a starting gas price of $7.60 per mcf. Though the price is higher than in the comparable Enstar-Vision Resources deal, also for roughly 1 bcf per year, it is less than the $7.72 IGU had previously been paying Hilcorp and IGU leaders also note the price includes Hilcorp’s willingness to match gas supply to the small utility’s highly seasonal demand swings.

After the first year the gas price increases yearly by 7 cents per mcf through the end of the contract for a final price of $7.60 per mcf through March 2026.

Gas deliveries are expected to start May 11 and either Enstar or Vision Resources can terminate the deal if the RCA has not approved it by May 1, according to a letter from Enstar officials accompanying the contract filing.

“The (Vision contract) also ensures an element of ongoing diversity in Enstar’s gas supply portfolio, allowing Enstar to continue to purchase from a smaller Cook Inlet producers. This is important to ensure the safe and reliable delivery of gas to our customers and could encourage further exploration and development in the Cook Inlet basin,” Enstar Regulatory Supervisor Chelsea Guintu wrote.

Enstar also has a small firm supply contract with Furie Operating Alaska through early 2023. The gas utility projects its demand will remain flat at 33.6 bcf per year through early 2026.

Vision Resources, a privately held, Louisiana-based firm, recently purchased the onshore North Fork Unit on the Southern Kenai Peninsula near Anchor Point from Anchorage-based Glacier Oil and Gas. Company representatives could not be reached for this story, but late February filings to the state Division of Oil and Gas by Glacier leaders indicate the company is in the process of transferring the North Fork assets to Vision Resources.

Glacier Oil and Gas suspended operations at several of its other Inlet and North Slope facilities last summer due to the collapse of oil and gas markets early in the pandemic.

The RCA is accepting comments on the proposed contract through March 26.

Updated: 
03/03/2021 - 9:22am