BP signs deal to supply natural gas to Fairbanks utility

North Slope producer BP Exploration Alaska Inc. signed an agreement to supply as much as 23 billion cubic feet per year to Golden Valley Electric Association of Fairbanks for 20 years, Cory Borgeson, the utility’s president and CEO, said Sept. 19.

Golden Valley is the electric utility serving Interior Alaska.

The utility is working on a deal to build a natural gas liquefaction plant on the North Slope and truck LNG to Fairbanks for use in power generation. Golden Valley would also sell gas surplus to its needs to other potential buyers including Flint Hills Resources, operator of a crude oil refinery near Fairbanks, and Fairbanks Natural Gas, operator of a small gas utility in the Interior city.

Fairbanks Natural Gas now trucks LNG from a small LNG plant in the Matanuska-Susitna Borough north of Anchorage, which liquefies gas purchased from Cook Inlet producers.

Golden Valley is seeking state financial help in developing the LNG plant on the North Slope. Borgeson said the price terms of the contract with BP are confidential, however.

The utility now generates most of its power using fuel oil and naptha, which are made from crude oil at the Flint Hills refinery and are very expensive. Having acess to less costly gas for power generation would help Golden Valley lower electrical generation costs. Similarly, Flint Hills uses oil to heat crude oil and provide power at its refinery. Gas would lower its operating costs, the company has said in previous statements.

“In addition to satisfying our own electrical generation needs, we at GVEA recognized the opportunity and our responsibiity to address the energy crisis facing Interior Alaska’s residents and businesses, in particular the high cost of space heating,” Borgeson said in a statement.

Updated: 
11/11/2016 - 1:11pm