Industrial Gas Users 'Concerned' About Supply, Prices
Large industrial and commercial gas customers came to the
first-ever "Natural Gas Summit" in Colorado last week looking to be
convinced that enough gas supply --- which is being stretched thin
this summer due to high demand from power generation --- exists to
meet their needs. Independent and major producers were more than
happy to oblige.
It "looks as though consumption right now is outstripping supply
and we're all very concerned. So we're here to.....be assured that
there's plenty of supply out there," said Lee Gooch, vice president
of the energy department at PCS Nitrogen Fertilizer L.P/ (formerly
Arcadian Corp.) in Memphis, TN.
Industrial gas customers are "very much aware" of the problem
the gas industry is having in refilling storage this summer due to
the demand of electric generation, and are concerned about the
effects this could have on reliability of service and prices next
winter, Gooch noted. If "we're going to fill up [storage] and
deplete it and fill it up again all in one year, I'd like to see
how that's going to be done."
Gooch, who oversees the purchase of 150 Bcf/year for his
company, was one of 30 gas consumer representatives who met with
gas industry executives at the Natural Gas Council-sponsored summit
last Monday in Colorado Springs, CO. He joined a panel of joined
industry experts in a teleconference briefing with reporters.
The tight gas supply has lead to a doubling of prices this year.
Gooch, who spoke on behalf of the Process Gas Consumers Group, said
the escalating prices have taken their toll on a number of
fertilizer plants in North America. Many have been forced to close
their doors because they can't compete with fertilizer produced
from "much cheaper" gas in Russia, Trinidad, Venezuela and
elsewhere, he noted.
It's times like these that highlight the drawbacks of the
federal government's energy policy, he said. Gooch believes the
government is putting far too much emphasis on natural gas as "the
clean fuel and the cure-all for [all] our environmental problems."
He said he'd prefer "a more balanced approach by the government to
improve all fuels and their impact on the environment, rather than
just point to natural gas" as the solution.
"I think there is help on the way. I'm certainly hearing
that...today about all the drilling that's going on. So it's just a
matter of time [before] the gas shows back up into the
marketplace," providing some price relief, Gooch said. Jerry
Jordan, president of Jordan Energy and chairman of the Independent
Petroleum Association of America (IPAA), estimated that drilling
for natural gas has risen 90% in the past year and a half.
The "producing industry is recovering from a very severe
economic dislocation caused by particularly low oil prices. It has
recovered.....I am fully confident that you'll see a strong
recovery," said Richard J. Sharples, president of Anadarko Energy
Services and chairman of the Natural Gas Supply Association (NGSA).
He believes there will be sufficient gas supply to meet the
summer gas demand of electric generators as well as the winter
demand of traditional gas customers. "It's a matter of transition.
We'll get there," he told reporters.
Many are blaming the higher prices on natural gas's transition
from a winter-only to a year-round fuel. But Gary L. Neale,
chairman of NiSource Inc. and chairman of the American Gas
Association (AGA), said there's a "net benefit" to year-round
demand --- higher system utilization, which will enable NiSource to
"pass our fixed costs along in a better fashion."
At the summit, Gooch said he discovered that the gas industry
isn't much in tune with customers. ".....[W]e're finding out that a
lot of folks in the natural gas business don't know what the
customer wants or what our concerns are," he noted.
NiSource learned that it needs to focus more on its customers'
needs and "less on what we call traditional utility
considerations," Neale said. "[We] heard from our customers that
they want a single-point contact. They want to be recognized that
they have unique positions in the marketplace," as well as operate
within "tight business frames."