Producer-Owned Pan Alberta Opens for Business
After months of negotiations and two years of wrangling in
Canadian courts, Pan-Alberta Gas Ltd. has been taken over by the
producers in its supply pool.
TransCanada PipeLines quietly and gladly parted with Pan-Alberta
as an unwanted part of the acquisitions that came from merging with
The previously-announced deal to transfer ownership closed after
the participants also settled a marathon lawsuit in Alberta Court
of Queen's Bench. Nine leading gas producers had alleged that
Pan-Alberta under the previous ownership of Nova, in bygone
relationships involving the predecessor of Dynegy (NGC Corp.)
strayed from commitments to obtain the highest possible prices for
the supply pool as a result of other corporate interests. Damage
claims reached C$150 million (US$105 million). Reports were that in
addition to taking over the marketing company which had sales of
$1.6 billion in 1997, producers were to receive a payment of $18
Under the new ownership structure, which was approved by 339
production companies with 97% of the gas under contract to
Pan-Alberta, the supply pool will elect Pan-Alberta's board of
directors to make sure management heeds their interests above all.
President Rod Pocza described the deal as "an industry solution"
for what had become a sore spot in the gas community. "It is a
template for the potential growth opportunities of the marketing
and aggregation business for producers."
The deal also brings Pan-Alberta, with sales exceeding 1.6 Bcf/d
from contracted reserves of about 5 Tcf, into line with other major
Canadian supply aggregators. ProGas Ltd.'s name stands for
producers' gas and it is owned by producers. CanWest Gas Supply, an
aggregator and marketer of production from British Columbia, is a
co-operative owned by producers with B.C. wells. TransCanada's own
aggregator TransCanada Gas Services, selling about 5 Bcf/d from
about 13 Tcf of reserves contracted with 700 producers remains
outside the tradition but is committed by a spring pact with the
production community to ensure it has more say in marketing
"Pan-Alberta now can provide new services to the producers while
simplifying the business processes for them," Pocza said. "All
profits and costs flow directly to producers." Pocza sees the
emergence of the producer-owned and controlled marketing company as
a trend, although it is one U.S. companies have trouble following
because of antitrust laws. It provides economies of scale which
producers cannot achieve marketing their own gas.
Pocza said the deal had cleared the Canadian Competition Bureau.
The Pan-Alberta pool has 435 producers under contract including
very small producers and part of the production of larger companies
who are looking to achieve diversity of sales.
Pan-Alberta holds 750 MMcf/d or half of the existing space on
Northern Border. It also sends gas in through Sumas and Kingsgate
to Northwest Pipeline and PGT. Questioned, Pocza said he did not
believe Canadian producers can fill all the new export pipeline
capacity currently going into service on Northern Border and
TransCanada: "It's a challenge to producers to come up with the
supply. They will have to do a lot more drilling."
Gordon Jaremko, Calgary, Ellen Beswick, Washington
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