Large industrial and commercial gas customers came to thefirst-ever “Natural Gas Summit” in Colorado last week looking to beconvinced that enough gas supply — which is being stretched thinthis summer due to high demand from power generation — exists tomeet their needs. Independent and major producers were more thanhappy to oblige.

It “looks as though consumption right now is outstripping supplyand we’re all very concerned. So we’re here to…..be assured thatthere’s plenty of supply out there,” said Lee Gooch, vice presidentof the energy department at PCS Nitrogen Fertilizer L.P/ (formerlyArcadian Corp.) in Memphis, TN.

Industrial gas customers are “very much aware” of the problemthe gas industry is having in refilling storage this summer due tothe demand of electric generation, and are concerned about theeffects this could have on reliability of service and prices nextwinter, Gooch noted. If “we’re going to fill up [storage] anddeplete it and fill it up again all in one year, I’d like to seehow that’s going to be done.”

Gooch, who oversees the purchase of 150 Bcf/year for hiscompany, was one of 30 gas consumer representatives who met withgas industry executives at the Natural Gas Council-sponsored summitlast Monday in Colorado Springs, CO. He joined a panel of joinedindustry 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, saidthe escalating prices have taken their toll on a number offertilizer plants in North America. Many have been forced to closetheir doors because they can’t compete with fertilizer producedfrom “much cheaper” gas in Russia, Trinidad, Venezuela andelsewhere, he noted.

It’s times like these that highlight the drawbacks of thefederal government’s energy policy, he said. Gooch believes thegovernment is putting far too much emphasis on natural gas as “theclean fuel and the cure-all for [all] our environmental problems.”He said he’d prefer “a more balanced approach by the government toimprove all fuels and their impact on the environment, rather thanjust point to natural gas” as the solution.

“I think there is help on the way. I’m certainly hearingthat…today about all the drilling that’s going on. So it’s just amatter of time [before] the gas shows back up into themarketplace,” providing some price relief, Gooch said. JerryJordan, president of Jordan Energy and chairman of the IndependentPetroleum Association of America (IPAA), estimated that drillingfor natural gas has risen 90% in the past year and a half.

The “producing industry is recovering from a very severeeconomic dislocation caused by particularly low oil prices. It hasrecovered…..I am fully confident that you’ll see a strongrecovery,” said Richard J. Sharples, president of Anadarko EnergyServices and chairman of the Natural Gas Supply Association (NGSA).

He believes there will be sufficient gas supply to meet thesummer gas demand of electric generators as well as the winterdemand 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 transitionfrom a winter-only to a year-round fuel. But Gary L. Neale,chairman of NiSource Inc. and chairman of the American GasAssociation (AGA), said there’s a “net benefit” to year-rounddemand — 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 industryisn’t much in tune with customers. “…..[W]e’re finding out that alot of folks in the natural gas business don’t know what thecustomer 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 utilityconsiderations,” Neale said. “[We] heard from our customers thatthey want a single-point contact. They want to be recognized thatthey have unique positions in the marketplace,” as well as operatewithin “tight business frames.”

Susan Parker

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