Homer Electric Association has signed a Gas Sale and Purchase Agreement with Furie Operating Alaska LLC.
Furie is an independent oil and gas company that focuses on the exploration and production of natural gas in the Cook Inlet area.
Under the terms of the agreement, Homer Electric’s generation and transmission subsidiary, Alaska Electric and Energy Cooperative (AEEC), will receive natural gas from Furie beginning on April 1, 2016. The contract terminates December 31, 2018. Additionally, there are two one-year options to extend the term of the agreement through December 31, 2020.
The gas will be used to fuel HEA-owned power plants in Nikiski and Soldotna.
Currently, Homer Electric is purchasing gas from Hilcorp under terms of a contract that expires March 31, 2016. To secure a future gas supply beyond March 31, 2016, HEA contacted known Cook Inlet natural gas producers and began negotiations with those producers that expressed an interest and an ability to provide natural gas under the terms of a utility based natural gas supply contract. The agreement with Furie is the culmination of that effort.
The agreement calls for HEA/AEEC to purchase between 4.0 and 6.2 billion cubic feet of natural gas annually beginning in March 31, 2016.
With regard to gas pricing, HEA’s gas costs in 2016 and 2017 will actually be lower than what HEA is currently paying for gas under its existing Hilcorp contract. HEA General Manager Brad Janorschke said the agreement with Furie is a positive development for the Cook Inlet area.
“This contract will provide one of the Cook Inlet independent producers with a market for its gas, allowing them to move forward with significant investment in Cook Inlet offshore gas infrastructure. The contract brings to fruition the State of Alaska’s goal to incentivize offshore exploration and development in the Cook Inlet. The excess capacity that will result from this development and the pricing within this contract may lead to more competitive gas pricing within the Cook Inlet market,” said Janorschke.
Furie finished construction and installation of a new offshore platform, 16 miles of subsea pipeline and a natural gas processing facility in Nikiski this summer. They are currently connecting the Kitchen Lights Unit discovery well within the platform caisson to the production equipment. Furie has indicated that they plan to have production online by November of 2015. HEA has every confidence in Furie’s ability to deliver gas according to the terms of this contract.
Furie’s Senior Vice President Bruce Webb said the contract with HEA is an exciting step for Furie’s long-term success in the Cook Inlet.
“When we began drilling in 2011, the Cook Inlet was in the midst of a potential energy crisis. We are proud to be one of the companies to provide energy security to the residents of Southcentral Alaska. It seems fitting that our first natural gas deliveries will be to HEA who supplies electricity to the community where our onshore production facility is located. We look forward to supplying natural gas to other Cook Inlet utilities.”
The Gas Sale and Purchase Agreement does not become effective until approved by the Regulatory Commission of Alaska (RCA).