With a growing diversity of sources, robust supplies and recession-tempered demand, Southwest Gas Corp. is in a strong position to serve its 1.8 million customers spread around Nevada, Arizona and a sliver of the eastern part of Southern California. The only question plaguing Bill Moody, Southwest's vice president for gas resources, is how long can the good life last?
Moody and his colleagues at the Las Vegas, NV-based natural gas distribution utility have continued to be amazed at how relatively low wholesale gas prices have remained even at the outset of winter.
"We've seen the prices in the West stay at or under $4 for the winter strip, and our futures prices are not getting higher than $5.50 now," Moody said. "And it seems like the futures [prices] have turned out to be 'high' if we take into consideration the experience of the last year and a half by the time the futures close out the index price has been lower.
"That signals to me that between the reduction in demand from the recession and the [over]supply situation that we're in, demand is satiated and filled up. It is a buyer's market. But how long that lasts is so tough to figure out. In the West, it looks like we are in pretty good shape, but we may still be driven by what happens in the East."
Moody keeps an eye on the Northeast, which he thinks still needs more pipeline capacity into New York and farther northeast. The prices there have climbed to the $20-25 area sometimes, he said. In the West, the situation is just the opposite with the new Ruby Pipeline coming and the Rockies Express Pipeline beginning to reverse some easterly volumes to flow westerly.
"If capacity stays high, everything should be OK," Moody said. "We're in a position to take any advantage that Ruby provides," he noted, referring to Southwest's existing two interstate pipelines that can access Ruby at its westerly end at Malin, OR.
"We could pull gas off of Ruby if necessary at the interconnection with [Southwest's] Paiute Pipeline, although unless the capacity were heavily discounted there would be no advantage to us because of the final Ruby tariff charges [which he thinks are in the 95 cents to $1.05 range]. "Our combined rates for Paiute and Northwest Pipeline are not more than 80 cents," he said.
Moody said as an official with a local gas distributor he likes the prospects of having even more gas options. "Putting another $1.2 Bcf/d at Malin is a lot of gas at that market."
He is convinced that his utility should remain in "good shape" on both pipeline capacity and natural gas supplies. The 24-inch diameter Paiute line in the north is fed by Northwest Pipeline and has interconnections with the new Ruby line and the TransCanada Tucscarora Pipeline coming down from Malin into northern Nevada.
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