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Interior Gas Utility Adopts Purchase, Manufacturing Agreements

Jan 18, 2023 | News, Oil & Gas

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The Interior Gas Utility (IGU) is authorizing its general manager to execute a purchase agreement with Hilcorp North Slope and a manufacturing agreement with Harvest Alaska LNG.

Gas from the North

The board of the utility, owned by the Fairbanks North Star Borough, adopted the resolution on Tuesday. Following the signing of the agreements, Harvest Alaska will start the process of building a plant near Deadhorse to liquify up to 150,000 gallons of natural gas per day. The LNG plant is scheduled to become operational in late 2024.

The contracts are for an initial twenty-year term, with an option for IGU to extend them for two additional five-year terms.

IGU’s gas supply contract in the Cook Inlet will provide supply stability until the Harvest plant is commissioned. Once reliable operations from the North Slope are instituted, Hilcorp and IGU will work collaboratively to sunset their Cook Inlet contract. The utility began looking for alternatives after Hilcorp warned its buyers last year that it could not guarantee a supply of Cook Inlet natural gas for long-term contracts.

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“Available options were evaluated on reliability, security of supply, sustainability, delivery and ability to continue expansion of gas service, all the while remaining focused on controlling and stabilizing costs”, says IGU Board Chair Gary Wilken.

Harvest Alaska LNG is a subsidiary of Harvest Midstream, a privately held midstream service provider based in Houston, Texas that operates various crude oil and natural gas gathering, storage, transportation, treatment, and terminal assets across the United States.

The Harvest agreement grants IGU the right to additional LNG production capacity and the right of first refusal in the event of an LNG plant sale. IGU will keep its Cook Inlet LNG plant, Titan, staffed and in warm status to increase operational redundancy and ensure continued reliable operation.

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