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Industrial Gas Users 'Concerned' About Supply, Prices

Industrial Gas Users 'Concerned' About Supply, Prices

Large industrial and commercial gas customers came to the first-ever "Natural Gas Summit" in Colorado last week looking to be convinced that enough gas supply --- which is being stretched thin this summer due to high demand from power generation --- exists to meet their needs. Independent and major producers were more than happy to oblige.

It "looks as though consumption right now is outstripping supply and we're all very concerned. So we're here assured that there's plenty of supply out there," said Lee Gooch, vice president of the energy department at PCS Nitrogen Fertilizer L.P/ (formerly Arcadian Corp.) in Memphis, TN.

Industrial gas customers are "very much aware" of the problem the gas industry is having in refilling storage this summer due to the demand of electric generation, and are concerned about the effects this could have on reliability of service and prices next winter, Gooch noted. If "we're going to fill up [storage] and deplete it and fill it up again all in one year, I'd like to see how that's going to be done."

Gooch, who oversees the purchase of 150 Bcf/year for his company, was one of 30 gas consumer representatives who met with gas industry executives at the Natural Gas Council-sponsored summit last Monday in Colorado Springs, CO. He joined a panel of joined industry 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, said the escalating prices have taken their toll on a number of fertilizer plants in North America. Many have been forced to close their doors because they can't compete with fertilizer produced from "much cheaper" gas in Russia, Trinidad, Venezuela and elsewhere, he noted.

It's times like these that highlight the drawbacks of the federal government's energy policy, he said. Gooch believes the government is putting far too much emphasis on natural gas as "the clean fuel and the cure-all for [all] our environmental problems." He said he'd prefer "a more balanced approach by the government to improve all fuels and their impact on the environment, rather than just point to natural gas" as the solution.

"I think there is help on the way. I'm certainly hearing about all the drilling that's going on. So it's just a matter of time [before] the gas shows back up into the marketplace," providing some price relief, Gooch said. Jerry Jordan, president of Jordan Energy and chairman of the Independent Petroleum Association of America (IPAA), estimated that drilling for natural gas has risen 90% in the past year and a half.

The "producing industry is recovering from a very severe economic dislocation caused by particularly low oil prices. It has recovered.....I am fully confident that you'll see a strong recovery," said Richard J. Sharples, president of Anadarko Energy Services and chairman of the Natural Gas Supply Association (NGSA).

He believes there will be sufficient gas supply to meet the summer gas demand of electric generators as well as the winter demand 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 transition from a winter-only to a year-round fuel. But Gary L. Neale, chairman of NiSource Inc. and chairman of the American Gas Association (AGA), said there's a "net benefit" to year-round demand --- 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 industry isn't much in tune with customers. ".....[W]e're finding out that a lot of folks in the natural gas business don't know what the customer 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 utility considerations," Neale said. "[We] heard from our customers that they want a single-point contact. They want to be recognized that they have unique positions in the marketplace," as well as operate within "tight business frames."

Susan Parker

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