Utilities, power generators and industrial end-users are going to have to pick their spots and move quickly to secure lower-priced natural gas in the increasingly higher-priced and challenging market, according to Val Trinkley of EnergyUSA, a NiSource company, who will be conducting a strategy workshop at GasMart 2008 in Chicago May 20-22.
The veteran general manager of EnergyUSA, a Midwest natural gas marketing company, said the recent large move of monies from equities into commodities as well as the current "fear premium" regarding storage and summer heat have added to the circumstances that have prices currently hovering around $11/Mcf. "There certainly is the fear of storage not getting refilled because we drained it pretty hard last winter," said Trinkley.
"There are a number of things that need to shake out before we get some relief from the prices that we are seeing now. I believe some of that will happen, but I don't think the window will be open for very long. If you want to catch some dip in the market, you better be prepared to take some pretty quick action. I think there will be a dip that will come [in] late spring-early summer, but after that, out of fear of summer heat, [price] will be a problem again for a number of buyers until we see whether summer shows up or not. If summer heat does show up, it will keep things elevated till the fall, where people will be hoping for a fall dip in prices."
Trinkley, who has long said that liquefied natural gas (LNG) is "not a savior" to U.S. demand, highlighted the current $13-14/Mcf natural gas price in the Asian markets and some European locations as proof of that. "It is sort of an all bad news conspiracy right now, where during the early winter it was almost all good news," he said. "I think the optimism early last winter kept a lot of people from taking action. Now that we have mostly bad news, it is probably not the time to panic."
He said natural gas futures are due for a "pretty significant correction" after the recent strong price moves higher. "I don't think [this strength] can be sustained from a technical or fundamental standpoint for much longer without a nice correction. This is typically the time when we should get some help, and what we need to sustain that help is good storage injections. Without strong injections, it'll be hard to get a serious correction."
Trinkley said end-users need to figure out what their goals are and what they can live with. "A lot of people's budgets are unfortunately blown right now. If they based their budgets for 2008 prior to the 2007-2008 winter, then they have to accept the fact that it is highly likely that their budget is in trouble," he said. "People need to build a plan around the current reality that we find ourselves in now and be prepared by building a strategy that they can live with, and can enact quickly to take advantage of what the market can and will give us."
He added that end-users should embrace long-term energy strategies, including conservation efforts that go beyond the "low hanging fruit" of light bulb changing to projects that might have three-to-five year paybacks. "Unfortunately a lot of people look shorter term and these are the times where people need to build in conservation into their plan," Trinkley said. "One of the concerns is this is just another uptick in the market that is going to eventually go higher, even if we do get some downticks that give people buying opportunities. Some people are predicting $12-15 gas in the next five years and you want to be prepared to avoid that as much as possible by developing a long-term strategy.
"You want to build a longer-term strategy of what you can accept, and you want to avoid double-digit gas out into the long term as long as possible, even though we will probably see those prices more and more as time goes on. Utilities and end-use customers still don't do longer-term strategies on energy in the way of conservation or in the way of a price plan, so it is something people need to do. It's harder on commercial and industrial customers because they haven't done longer-term planning on energy just because some of their longer-term planning on product development maybe doesn't come with it."
Purchasers, besides making up more than half the GasMart 2008 attendees, will be taking an active role in the program for this 22nd annual event sponsored by Intelligence Press Inc. The Process Gas Consumers (PGC), an organization of industrial natural gas users, is a sponsor and will be hosting a special luncheon for end-users.
Alex Strawn, Purchasing Group Manager, North American Energy for Procter & Gamble, will address the GasMart audience and buyers for Alcoa, ArcelorMittal USA Inc., Potash Corp., Abbot and USG Corp. will discuss their primary energy concerns.
Filling out the pre-registered 500 attendees at GasMart 2008 are large contingents of natural gas producers, marketers and pipeline companies (see GasMart 2008 attendee list).
GasMart speakers include keynoters Brian Frank, President of BP Energy Company, North America Gas & Power and Kathleen Eisbrenner, Executive Vice President, Global LNG, Shell Gas and Power International. Their companies will be among the sponsors meeting with customers in the GasMart Market Network Center.
Also offering their insight will be Will Hussey, Senior Vice President, Origination, of ConocoPhillips and David Slater, Managing Director, Marketing & Structured Products for Nexen Marketing. Executives from pipeline leaders TransCanada and Kinder Morgan's Rockies Express Pipeline will discuss deliverability and storage.
Besides EnergyUSA, representatives of Integrys, OGE Energy Resources, and Wachovia will be advising on structuring transactions and managing risk.
Others offering market insight will be Porter Bennett, President of Bentek Energy, an industry data collection and analysis firm, Aaron Studwell, Meteorologist & Sr. Manager, Research & Analytics, Weather Insight, and Jim Osten, Principal, North American Energy Services, Global Insight (USA), Inc.
IntercontinentalExchange will have a workshop on electronic trading and host the main GasMart reception. The New York Mercantile Exchange is sponsoring attendance at a Chicago White Sox game and the North American Energy Credit and Clearing Corp. is hosting a golf tournament at the Harborside International club.
The GasMart program and Market Network Center will be in the headquarters hotel, the Sheraton Chicago Hotel & Towers. Go to gasmart.com for more information and to register.
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