Houston-based Dynegy Marketing and Trade has beat out some ofthe top natural gas producers in the nation in the latest round ofbidding for Minerals Management Service’s royalty-in kind gasproduced from federal leases in the Gulf of Mexico.

As a result, Dynegy Marketing has won the right to take custodyof about 180 MMcf/d of royalty gas produced from propertiesconnected to Stingray Pipeline, the High Island Offshore System,the U-T Offshore System, Pelican Gas Gathering System, ANR Pipelineand Transcontinental Pipe Line’s North High Island system duringthe period between Nov. 1, 2000-March 31, 2001.

Under the agreement with MMS, Dynegy will take possession of theroyalty gas at federal offshore leases in the Gulf, and willre-deliver a “very large portion” of gas as payment to the agencyat two onshore delivery points — ANR and Natural Gas Pipeline Co.of America (NGPL) Louisiana pools. “I’m not at liberty to sayexactly how much” of the gas will be returned to MMS as payment,said Gregory Smith, manager of the Interior Department agency’s RIKoperations.

MMS then will sell part of the delivered gas to the federalGeneral Services Administration to supply the energy needs offederal facilities. The remainder will be sold in the spot marketin either monthly or term transactions, he noted. In fact, Smithsaid MMS will post a monthly sale during the October bid week, andpossibly a five-month term sale for delivery to the ANR and NGPLpools.

Currently, Smith estimated that MMS has 20 to 30 pre-qualifiedbuyers for its RIK natural gas. Most of them tend to be gasmarketers, he said, but the agency is seeing more and more interestfrom end-users, especially utilities.

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