Calpine Corp., the San Jose, CA-based merchant power plantdeveloper, maintains a voracious appetite for natural gas that itexpects to reach 6 to 7 Bcf/d in the next five years, but it isunfazed by the current price spike and supply tightness headinginto winter. A diversified portfolio approach that aims for up to aquarter of its supplies coming from its own reserves makes Calpineofficials shrug off worries about future gas markets.

The forward forecasts for gas prices are all “quite high” onCalpine’s radar screen, but the company is confident this is goingto spur added improvements in E&P technology that ultimatelywill increase supplies of natural gas and mitigate the higherprices.

“Today we’re seeing more wells being drilled than ever before,”said Brad Barnds, Calpine’s vice president for fuel, westernregion. “The number of wells and rigs is very high. There are some750 rigs today drilling for gas. Longer term, there is a lot of gasin North America, so it is a matter of price, and at the rightprices the gas will be found and brought to the market in a timelymanner.

“The producers are very, very good at responding to pricesignals. When they see these high gas prices, somehow they findcrews to drill a bunch of gas wells. It is a very cyclicalbusiness.”

Although California’s gas prices are among the highest in thenation right now, Calpine finds a silver lining in its diversity ofsupply sources.

“We are optimistic (on both price and availability of gas)because we will draw on numerous supply basins, plus our ownproprietary gas reserves, long- and intermediate-term contractswith major suppliers, gas storage and contracting for pipelinecapacity,” he said. “We have a variety of supplies to meet theneeds of a portfolio of power plants across the country.

“We believe by operating systems of gas and systems of powerplants that we are able to provide a higher degree of reliabilityfor both gas and power into the marketplace.” Eventually, he saidCalpine expects prices to moderate.

The company has ongoing relationships with all major gassuppliers across the country, said Barnds, adding that the companyhas acquired natural gas assets in Canada, Texas and Californiaover the past 12 months and is “ramping up” by adding gas staff andinfrastructure.

“There is a lot going on at Calpine in support of this effort,”he said. “We’re building our physical portfolio at the same time weare contracting on a long-term and intermediate basis with large,credit-worthy gas suppliers, such as BP Amoco and Shell.”

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