The vast majority (90%) of the gas under the contract will be priced off of a basket of lower 48 production area price points, as published in Platts Gas Daily. The pricing formula in the contract will result in the most competitive price, on average, of any price formula presented to the RCA during the past decade for a major gas contract. Production area composite index compares favorably with Henry Hub and has averaged out to be 9% less than Henry Hub over the past four years.
As further consideration for the contract, Chugach Electric has agreed to withdraw its appeal of the US Department of Energy’s approval of the liquefied natural gas (LNG) export authorization for the period 2009-2011. Chugach Electric asked that DOE condition LNG exports by requiring that the gas producers also make binding commitments to meet the natural gas supply needs of gas-dependent Cook Inlet utilities such as Chugach Electric and ENSTAR. The new supply contract between Chugach Electric and ConocoPhillips ensures that Chugach Electric’s needs will be fully met through the end of the export authorization and then for significant portions of Chugach Electric’s requirements through 2016.
The contract was fully executed and submitted to the Regulatory Commission of Alaska yesterday. Chugach has been in negotiations with Cook Inlet producers for many years. We are pleased that the result of our efforts is a contract that provides needed gas volumes at a reasonable price and on terms that are fair, just and equitable.
