Since the Enron debacle and the collapse of the energy merchant sector, the face of natural gas marketing in the U.S. has changed along with the way business is conducted, according to a panel of speakers at GasMart 2006 in Denver.
With most of the mega-marketers of the 1990s exiting the business in 2002-2003, producers expanded their capabilities by stepping into the breach to take up the slack. Niche players, such as Eagle Energy are prospering, while banks are the major new entrants with deep pockets.
In the late 1990s, Enron, Duke and Aquila were the top three marketers by volume. But today, producers hold the top spots as BP, ConocoPhillips and Shell occupy the top three marketer positions. "Change has been the norm but for the wrong reasons," said David Slater, managing director of Marketing & Structured Products for Nexen Marketing. "In the 'new world,' trust, respect and ethical business practices have grown in importance."
Among the other changes, Slater added that great strides have been made in reporting standards and that the industry's conduct has turned around.
However, he pointed out that there are also a number of things that have not changed. He said there are still a few "very large" players and price volatility remains a concern for current day marketers.
Eagle Energy Partners CEO Griff Jones said niche marketers can still compete if business operations are structured properly. "Creditworthiness has always been the question," he said. "Focus on creditworthy, relationship-oriented, nonspeculative transactions."
In starting up Eagle Energy Partners, Jones said it was important to find the right people, find credit, keep a clean balance sheet and find the right partners. Independent producer Chesapeake Energy owns a 33% stake in Eagle Energy. Lehman Brothers owns another 33%.
On the banking front, Janelle Scheuer, director of Wachovia Commodity Derivatives Group, told the audience that all of the banks are coming into the energy marketing scene because there are "lower capital requirements for a higher return on capital." She also added that banks are willing to take on unwanted risk and that they add "AA" rated participants and enhance liquidity in the marketplace, which increases industry stability.
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