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Industrial Natural Gas Users Challenge Marketers, Pipelines on Value

May 12, 2008
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Industrial end-users participating in GasMart 2008 are challenging natural gas marketers and pipelines to add value or reduce costs to help their customers survive in the high-priced and volatile market.

"Our members are seeing prices significantly ahead of where they were last year at this time. We've never seen price gaps this large year to year," said Alex Strawn, energy purchasing manager for Procter & Gamble, speaking on behalf of the Process Gas Consumers group and leading the industrial contingent at GasMart in Chicago May 20-22.

With this kind of change in the playing field end-users are looking for ways to cut the cost. "We want to know exactly how natural gas pipelines and marketers will continue to be relevant and dynamic business partners to industrial end-users -- given an almost unpredictable and fluid market environment," Strawn told NGI.

"Industrials are trying to understand the true relevance of what marketers are doing in the marketplace, other than just marking up the price. Why is their margin deserved? I think marketers need to show us how individually they are adding value. The reality is you get quotes from five companies and often they all come in plus or minus a penny. How does that help us demonstrate to our management that they are each adding value?" Strawn asked.

"At least they could give us unique market options," but the daily blurbs he receives often tend to be alike. "If someone has a different opinion, I pick that out immediately, but they almost never do. End-users want to challenge all parts of the supply chain to help us survive in a very volatile market." Strawn said end-users are not averse to long-term contracts. "We'll consider anything that makes sense, particularly in this market."

As for the pipelines, "what are they doing other than just adding capacity? Are they trying to reduce shrinkage rates? Shrinkage is a big deal in this market."

Strawn noted that while some end-users are paying the higher prices now, the real pain will be hitting residential and commercial customers this winter. "Right now many utilities are buying gas for next winter," likely at rates from two to four dollars more than last year. That reality of the price hike will hit smaller consumers in the coming winter, and they will be asking the same questions the end-users are now."

The Procter & Gamble executive, who also heads up the Process Gas Consumers group (PGC), a sponsor at this 22nd annual GasMart, said other questions end-users have include how pipelines and marketers are adjusting their business models to address the growing "green" market and emphasis on conservation and how changes in federal regulation can work to the advantage of end-users.

On the supply side, Strawn said natural gas customers are looking for enlightenment regarding "the seemingly endless boom/bust mentality" surrounding liquefied natural gas (LNG) imports. "Will LNG be a truly significant ongoing help -- or will we continue to wait and wait for some real impact into the next decade?"

Responding to Strawn's questions on the same GasMart panel will be John Eagleton, vice president, Kinder Morgan Energy Partners, and Craig Jimenez, president, OGE Energy Resources. The moderator will be Dena Wiggins, partner, Sutherland Asbill & Brennan LLP and general counsel to the PGC.

Other end-users who will be voicing their concerns at GasMart 2008 include energy buyers for Alcoa, ArcelorMittal USA Inc., Potash Corp., Abbot and USG Corp. Energy purchasers make up more than half of the 500 attendees already registered. These are balanced by large contingents of natural gas producers, marketers and pipeline companies (see GasMart 2008 attendee list).

GasMart speakers and sponsors include executives from the natural gas marketing divisions of BP Energy, Shell, ConocoPhillips and Nexen, along with TransCanada from the pipeline side and marketers EnergyUSA, Integrys, and Wachovia.

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. The event is hosted by Intelligence Press, Inc. Go to for more information and to register.

©Copyright 2008 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
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