The biggest, oldest block of Canadian natural gas wound up in the hands of a household name in the West — and a major customer — when Cargill Ltd. took over the traditional “aggregator”-managed supply pools of Alberta and British Columbia from Mirant Corp. on Thursday (see Daily GPI, May 2).

The deal transferred capacity of about 3.5 Bcf/d, kept together by long-range contracts, including: 1.8 Bcf/d in TransCanada Gas Services, 1 Bcf/d in Pan-Alberta Gas, 500 MMcf/d in CanWest Gas Supply and 100-200 MMcf/d in Northwest Pacific Energy, a B.C. branch of Pan-Alberta.

Membership in the pools, which have a pedigree going back to the birth of the Canadian industry, overlaps and includes virtually all significant western producers: 550 in TransCanada, 400 in Pan-Alberta and 100 in CanWest. Members of the pools have a say in their management, and the choice of Cargill came as no surprise to Canadian industry observers.

While the Canadian arm of the Minneapolis-based global conglomerate of Cargill Inc. remains true to its agricultural roots by keeping its headquarters in the Manitoba capital of Winnipeg, the name is a fixture in Alberta. A half-hour drive south of the gas capital of Calgary at High River, Cargill’s 5,000-employee, 75-year-old network of Canadian interests is represented by one of the biggest meat-packing plants on the continent. Cargill’s North American chain of food-processing operations, mills, fertilizer plants and health and nutrition enterprises is a familiar customer for Canadian gas marketers.

To the Canadian gas community, Cargill also represents a proven, prudent and stable survivor of the commodity trading that killed Enron Corp. and by chain reaction eventually wounded all energy marketing specialists including Mirant. Born in 1865 as an Iowa crop warehouse, Cargill has for generations successfully traded notoriously unpredictable commodities including grains, cotton, cocoa, rice, sugar, and palm and coconut oil.

Involvement in energy trading on an international scale dates back a quarter-century, and has steadily expanded through operations such as Cargill-Alliant LLC — a joint venture that Cargill took over entirely last summer — and LevelSeas.com, a partnership on a global Internet exchange for ocean cargoes of bulk commodities including oil and gas between Cargill, BP, Royal Dutch-Shell and Britain’s Clarksons house of marine shipping services.

While Cargill remains a private company that reports only sketchy outlines of its financial results, the public postings make a point of showing that it kept the investment-grade ratings that were withdrawn from the energy marketing specialists in the wave of fear set off by the Enron collapse. On the Moody’s scale, Cargill long-term debt rates A-1 and its commercial paper stands at P-1. With Standard & Poor’s, Cargill debt is A+ and commercial paper is A-1.

“This is a significant expansion for us in terms of the role that we play in the market,” said spokeswoman Lori Johnson. “Obviously the entire sector is under an enormous amount of pressure right now, and with the exodus of players from the market, we see a need there for new marketers and folks like us who can expand and grow.”

“We haven’t focused on anything in particular yet, but we think there are some other opportunities in the energy sector,” said Johnson. “We’re looking at this as the beginning of an expansion of our energy trading. We have a number of customers and we hope to expand that customer base. We really see this as an opportunity to provide some risk management services and marketing services that we’ve developed over 138 years of working the commodity markets to help producers and consumers.”

David Gabriel, president of Cargill Power & Gas Markets, said the acquisition will allow Cargill to provide a broader range of producer and end-use customer solutions.

The changing of the gas guard happened with no fanfare and no hard words in Canada for Mirant, which said it will maintain a 30-employee operation north of the border after parting with the supply pools, 380 MMcf/d in gas transportation assets and 1.3 Bcf of storage capacity. But it will be a toehold compared to the stature that peaked with the late-2001 acquisition of the TransCanada pool, which put Mirant at the top among traders in Canadian gas with a staff of about 200. Cargill has said it plans to hold onto a significant portion of Mirant’s Calgary employees. Mirant will retain about 30 in its Calgary office.

Mirant entered Canada in January of 2000 by landing a contract to manage the Pan-Alberta supply pool, and promptly earned favor and respect by resolving strife that had boiled over into a fight in the law courts. No transaction price was disclosed for the transfer of the supply pools, but Mirant said it expects to lop more than US$200 million off its financial collateral obligations by giving up the majority of its Canadian operations.

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