2005

The U.S. Coast Guard in Portland, OR, last week began seeking comments on the suitability of liquefied natural Gas (LNG) tankers traversing the Columbia River in the Pacific Northwest.

Shut-in natural gas production returned rapidly over the Labor Day weekend but progress stalled last week due to damaged processing plants, pipelines and production facilities. As of Friday, some of the more serious damage left by Katrina was on two of El Paso Corp.’s major pipeline systems — Tennessee Gas and Southern Natural, three large Louisiana gas processing plants (Venice, Toca and Yscloskey) and several of Shell’s deepwater platforms (Mars, Mensa, Cognac and Ursa).

A Los Angeles Department of Water and Power (LADWP) $1.2 billion bond sale to cover infrastructure upgrades and a natural gas reserve purchase was halted Tuesday by the city council, sending the proposed sale back to the city-run utility for reworking. The action, along with the LADWP oversight board being in transition, could postpone the sale for weeks if not months, a utility official conceded Wednesday.

Four days after the rampaging Hurricane Katrina made landfall on the Louisiana Coast the natural gas industry was just beginning to get some idea of the extent of the damage to onshore facilities, some of which were still under water, and offshore rigs, platforms and pipelines, some damaged and some missing in action. The only sure thing was that Katrina would go down in the record books as “catastrophic,” and just about the most devastating storm in 100 years or more. The word heard over and over was “unbelievable,” which was an understatement.

Since Hurricane Katrina stormed through the Gulf of Mexico, most of the concerns about oil and natural gas production have centered on the damaged offshore production platforms and drilling rigs. But in the short-term, that’s not the most important part. Producers are contending with a lack of communication services, not enough surveillance aircraft, and above all, lost employees, most of whom are focused on their own survival and that of their families and homes in the New Orleans area.

After trading within a range of more than $1, October natural gas futures on Wednesday afternoon might have experienced a key reversal on expectations that damage to Gulf production operations may not be as bad as originally assumed. The prompt month settled at $11.472, down 18.7 cents for the day.

Surprise, surprise! A screen spike nearly always leads to higher next-day cash prices, and Wednesday’s record-high daily settlement for a prompt month would have seemed to have extra potency in its impact. But prices Thursday bowed instead to generally tepid weather fundamentals and to growing indications that Hurricane Katrina will not make it to the eastern end of the Gulf of Mexico production area and instead will be diminishing power generation load in the Southeast by early next week.

Coming in just a bit higher than expectations, the Energy Information Administration reported Thursday morning that 60 Bcf was injected into underground natural gas storage for the week ended Aug. 19. In addition to the storage report, traders also had to digest updated storm forecasts, while making preparations for the September natural gas futures contract’s expiration on Monday.

The continuing crushing heat through the Southwest Tuesday pushed several Gulf Coast points into $10.00 territory normally reserved for the Northeast, while price increases in other areas of the country could be termed relatively moderate, matching their weather. But the overall momentum continued up, spurred by continuing futures market gains and growing concern about potential offshore shut-ins in the near future.