Reliability of supply, not price, is the most important factor when they make deals, according to a panel of industry marketing/trading representatives.
The panelists of buyers representing a variety of energy companies — Bob Ankersheil, manager of gas supply for CPS Energy, Ron Johnson, purchasing and contracts analyst for Marathon Petroleum, Terrance O’Malley, CEO of Hartford Bio Energy LLC and Ronald Mosnik, director of Integrys Energy Group Inc. — said during the LDC Forum Mid-Continent in suburban Chicago that price is not their highest priority.
“The big factors that we really look at when purchasing are reliability — I think that’s probably the biggest thing — cost and diversity of supply,” Mosnik said.
Mosnik said Integrys and other buyers focus first on finding historically reliable suppliers, rather than a price sheet. They protect themselves further by spreading purchases out among several suppliers. Still, the bottom line is the bottom line, and having uninterrupted service is a cost savings, he said.
“At the end of the day, reliability turns into price,” Mosnik said.
A stumbling block to both reliability and price is wellhead freeze outs, which can not be declared force majeure, Mosnik said. “We’ll look at gas that has freeze off protection and gas that does not,” he said. While they prefer gas that comes with freeze up protection, Integrys will buy gas that does not and cover themselves with a storage purchasing agreement that guarantees spring gas if there are a lot of freeze offs.
Johnson said reliability works both ways: customer demands often fluctuate in the same ways supply can.
“Refineries tend to be pretty consistent when it comes to their output,” Johnson said. “When it comes to input of natural gas, they’re all over the place.”
During a question and answer session, Ankersheil, Johnson and Mosnik all said they do not report details of their purchases to published indexes, but put more faith in the numbers reported by indexes than they did just a few years ago.
©Copyright 2007Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |