The timely and widely available information on natural gas physical and financial transactions puts the gas market ahead of other commodities in transparency and efficiency, according to a study by research scholar and author William P. Albrecht. The study, publicized by the Natural Gas Supply Association, finds that the information available to the natural gas market "has grown to a level that is unrivaled by other commodities. The system of index price formation and discovery is unique to the U.S. natural gas market and contributes substantially to price transparency and competitive pricing." In the physical market the regular surveys of prices at dozens of locations conducted by independent publishers follow guidelines established by the Federal Energy Regulatory Commission (FERC). Voluntary participants in the survey "follow equally rigorous FERC-established procedures for the reporting of this data. The integrity of this structure has been well established for over five years and pricing information is available within the market for more than 25 Bcf/d, an amount equal in size to one-third to one-half of total U.S. natural gas consumption," Albrecht said. In the financial market, the Nymex and IntercontinentalExchange electronic platforms provide real time transparency for futures, options and a large number of swaps.
The Federal Energy Regulatory Commission has approved Transcontinental Gas Pipe Line's (Transco) proposal to expand its natural gas pipeline by 308,500 Dth/d to serve growing markets in the southeastern region. Service from the 85 North project will be available in two phases. Phase 1 will increase capacity by 90,000 Dth/d by the summer of 2010, while Phase II will hike capacity by 218,500 Dth/d by summer 2011. Construction on Phase 1 is expected to begin this fall, and Phase II construction is due to get under way next summer, according to the pipeline, a subsidiary of Tulsa-based Williams Cos. Transco proposes to construct three 42-inch diameter pipeline loops with a combined length of approximately 22.06 miles adjacent to its existing system in Alabama and South and North Carolina, as well as add a new 20,500 hp compressor station in Anderson County, SC, and modify eight existing compressor stations in Mississippi, Alabama, Georgia and South and North Carolina. It estimates that the 85 North project will cost approximately $248 million. Combined with its Mobile Bay South II project, the 85 North expansion creates over half a Bcf of takeaway capacity from Station 85 in west-central Alabama to downstream markets, according to Williams.
The proposed American Clean Energy and Security Act of 2009, better known as the Waxman-Markey climate bill, is economically sound and may have benefits worth twice as much as the cost to implement it, an analysis has found. Special interest groups, as well as federal agencies that include the Environmental Protection Agency (EPA) and the Energy Information Administration, have attempted to estimate the costs associated with HR 2454, the proposed greenhouse gas (GHG) legislation. New York University School of Law's Institute for Policy Integrity attempted to determine the proposed legislation's benefits in a policy brief titled "The Other Side of the Coin: The Economic Benefits of Climate Legislation." Authors J. Scott Holladay and Jason A. Schwartz determined that "from almost any perspective and under almost any assumption, HR 2454 is a good investment for the United States to make in our own economic future and in the future of the planet." The authors focused on the worth of a ton of carbon -- not from its price on a carbon exchange, but rather how much a ton of carbon not emitted to the atmosphere would be worth to society in avoiding climate change. Their estimate: around $19/ton.
The Federal Energy Regulatory Commission has given a favorable environmental assessment (EA) to two related expansions proposed by Texas Eastern Transmission (Tetco) to carry Rocky Mountain natural gas to Northeast markets. "Approval of the proposed projects, with appropriate mitigating measures, would not constitute a major federal action significantly affecting the quality of the human environment," FERC staff said of the proposed Texas Eastern Market Area Crossing (TEMAX) and Texas Eastern Incremental Market Area Expansion III (TIME III) projects. The TEMAX expansion would provide an additional 395,000 Dth/d of natural gas transportation from a receipt point with the Rockies Express Pipeline LLC (REX) system in Clarington, OH, the termination point for the 1,678-mile REX line, to an interconnect with Transcontinental Gas Pipeline (Transco) in York County, PA. The final phase of the REX line is expected to be completed and in service by Nov. 1 (see NGI, July 6). The TIME III project would provide additional transportation capacity of 60,000 Dth/d from a receipt point in Oakford, PA, to the same interconnect with Transco, the EA said (see NGI, Oct. 8, 2007). The projected in-service date for both expansions is November 2010, according to Tetco, a subsidiary of Spectra Energy. The projects call for the replacement of 25.9 miles of various diameter pipeline, construction of 9.6 miles of loop, the construction of a 26.5-mile pipeline lateral, the addition of 85,633 hp of compression at four existing compressor stations and the abandonment of 9,500 hp at one compressor station, the EA said.
Under its still relatively new natural gas transmission/storage system and firm access rights (FAR), including an independent system operator, Southern California Gas Co. (SoCalGas) won three and lost two minimum-flow contracts at the California Public Utilities Commission's (CPUC) business meeting in San Francisco. The estimated cost of the three approved deals is $2.6 million, the CPUC said. Through a fast-track advice letter process, Sempra Energy's Los Angeles-based gas utility requested expedited approval of five contracts to support its minimum-flow requirements on its Southern System transmission pipeline network. The contracts came as a result of the transmission system operator's request for offers. The two contracts denied included one with the SoCalGas utility gas acquisition department for gas supplies and a capacity purchase deal with El Paso Natural Gas. The CPUC said it was not adequately demonstrated that the gas utility department contract was needed and there was no proposal on how to treat the revenues from the contract. Regulators also denied the El Paso deal because it involved off-system deliveries, which are the subject of a separate proceeding at the commission.
Williams lifted its full-year 2009 profit guidance and said it plans to increase spending in 2010 and 2011 as natural gas prices move "sharply higher." Full-year 2009 adjusted earnings are forecast to be 75-90 cents/share, compared with an earlier forecast of 70-90 cents. In addition, Williams added $275 million to its 2009 capital expenditures (capex) through the rest of the year to expand exploration in Colorado's Piceance Basin. The revised assumptions and spending are partly based on Williams' outlook for gas prices through 2011. Williams said its New York Mercantile Exchange gas prices should average $3.80-4.65/Mcf in 2009; $4.50-7.00 in 2010 and $5-8 in 2011. Rockies gas prices are seen averaging $2.75-3.45/Mcf this year, $3.90-6.10 in 2010, and $4.34-6.95 in 2011. In its San Juan Basin/Midcontinent operations, Williams is forecasting gas prices will average $3-3.70/Mcf in 2009, $4.05-6.35 in 2010 and $4.55-7.30 in 2011. For 2009 capex is to be between $2.5 billion and $2.75 billion, which factors in the additional spending in the Piceance Basin.
Canadian Superior Energy Inc. shareholders voted to approve the acquisition of Challenger Energy Corp. and voted in favor of a new board of directors, which now includes Kerry R. Brittain, Marvin M. Chronister, James Funk, William Roach, Gregory G. Turnbull and Richard Watkins. All other annual meeting resolutions also were approved by shareholders, the Calgary-based producer said. Canadian Superior, which restructured after filing for bankruptcy in April, said in June it would acquire Challenger in a friendly transaction worth an estimated C$78 million, including debt (see NGI, June 22). The combined company would produce an estimated 3,050 boe/d, 85% weighted to natural gas. Besides undeveloped assets in Alberta and British Columbia, the company would hold diversified assets in Trinidad and Tobago and North Africa.
Houston-based Magnum Hunter Resources Corp. agreed to acquire cross-town producer Sharon Resources Inc., a subsidiary of Calgary-based Sharon Energy Ltd., in a stock trade worth an estimated $2.35 million. Magnum agreed to pay for the company with 2.294 million shares of its restricted common stock, which represents about 5.6% of the company as of Aug. 1. Closing is expected by the end of September. Sharon Resources has focused its exploration in Texas, where it has about 6,400 net acres in the emerging Eagle Ford Shale, as well as acreage in the Austin Chalk and Northwest Speaks areas. Under Magnum Hunter's direction, Sharon Resources would continue to acquire acreage in the Eagle Ford play. Based on an analysis completed in June, Sharon Resources had estimated total proved reserves of 2.9 Bcfe, which is 30% proved developed and 85% weighted to natural gas. Sharon Resources' current output is 288 Mcfe/d, 95% weighted to gas.
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