NGI Staff Reports

El Paso Energy reported the $35 million Samalayuca Pipeline, thefirst privately owned gas pipeline in Mexico, started operationslate last month and is flowing about 70 MMcf/d of gas from the U.S.border near El Paso to the Samalayuca I gas-fired power plant inNorthern Mexico and to consumers in the state of Chihuahua. The45-mile pipeline project, which includes 22 miles of pipe in theU.S. and 23 miles of pipe in Mexico, has a capacity of 212 MMcf/d.It is owned by a 50/50 partnership of El Paso affiliates and PemexGas Y Petroquimica Basica.

Chesapeake Energy announced two new acquisitions for a total of $88 million and 107 Bcfe of proven reserves and future drilling opportunities, with the largest deal targeting potentially higher value Canadian resources.

The recent protests of El Paso Natural Gas shippers regarding Natural Gas Clearinghouse’s much tighter grip on westbound firm transportation capacity (1.3 Bcf/d) are just the cries of industry fat cats who would rather avoid increased competition on what they consider their home turf, El Paso told FERC last week (please see stories in NGI 1-12-98, p.1 and 11-10-97, p.1).

As the Executive Committee of the Gas Industry Standards Board (GISB) recently ironed out most of the differences over one of the more contentious issues facing the industry – intra-day nomination standards – the year-long battle to implement procedures in El Paso Natural Gas’ tariff continued without an end in sight. El Paso had been expected to implement changes Nov. 1, 1997, at last giving its shippers several opportunities a day to nominate gas, correct nominations and schedule multiple (10) pool-to-pool transfers of gas. But the pipeline continues to push back its deadlines while changing its planned pooling provisions, which has angered shippers.

The Minerals Management Service published final rules implementing provisions of the Deep Water Royalty Relief Act of 1995 in the Federal Register Jan. 16. The act mandates volumes of royalty-free production from fields in water depths exceeding 200 meters, both for new leases (after Nov. 28, 1996) and for existing leases if production from those existing leases would not be economic without royalty relief. The act, which was enacted Nov. 28, 1995, has led to a surge of activity along the Offshore Continental Shelf of the Gulf of Mexico.

Attorneys for Granite State Gas Transmission and the Town of Wells squared off against each other last week at FERC over the merits of siting a controversial liquefied natural gas (LNG) facility in the Maine community.

While the Energy Information Administration (EIA) is bullish ongas production capacity, at least one analyst group holds a morereserved view. And 1997 year-end production data released last weekby two independents, while up, isn’t enough information to predictfuture production trends.

EOG reported net income of $43.2 million, or 28 cents/share for Q4 1997, up from $35.1 million, or 22 cents/share, for Q4 1996. Net operating revenues totaled $238 million, up from $204.3 million in Q4 1996. Discretionary cash flow totaled $173.6 million, up from $153.2 million for Q4 1996.

While the deep-water Gulf of Mexico continues to be a hot spot for E&P spending in the U.S., analysts are expecting a sharp slowdown in spending growth at most other domestic locations next year, a significant contrast to the record spending growth in the U.S. over the past two years. According to Salomon Smith Barney’s 16th annual survey of worldwide E&P expenditures, there will be a general shift toward greater spending overseas in 1998.