Brief

The British Columbia Utilities Commission said Friday that it has approved BC Gas Utility’s application for an increase in the rates it charges for the natural gas commodity. The increase will add approximately 16% to the typical residential customer’s total gas bill, about 6% less than the wholesale cost the distributor believes it may have to pay over the next 12 months. BC Gas said that the increase works out to an additional C$184 per year for a typical Lower Mainland home; C$167 per year for a typical home in the Interior and C$183 per year for a typical home in the Kootenays. The increase — which was requested earlier in the week (see Daily GPI, March 18) — will take effect April 1, 2003. The utility estimates the full impact of increased commodity prices would add almost 22% to the typical residential customer’s bill. Most of the company’s current gas contracts expire at the end of this month and it is in the market for supplies going forward. BC Gas serves 764,000 residential, commercial and industrial customers in more than 100 communities in British Columbia.

Coral Energy and Shell Trading U.S. are planning to co-locate their operations in Coral’s offices in downtown Houston. It is not a merger, a company spokesman said, and the units will not combine operations. Coral, which markets natural gas and power, and Shell Trading, which markets oil and products, will shed some of their combined 1,200-member workforce where there is redundancy. The cutback will be accomplished through voluntary actions, retirements, normal attrition, and relocations within the corporation.

Pioneer Natural Resources Co. said production delays on the start-up of its Canyon Express project dropped predicted fourth quarter production results, which now are expected to average 117 Mboe/d. Year-ago fourth-quarter production averaged 110 Mboe/d. The Dallas-based independent said operational issues had delayed production from one of its six wells in the project, but net production is currently reaching expected levels, averaging more than 100 MMcf/d with five of six wells producing. The sixth well is expected to begin production in the first quarter. Fourth quarter realized prices for natural gas liquids are expected to range between $16-$16.20/bbl, while oil prices should range between $22.90-$23.10/bbl. Pioneer’s fourth quarter realized price for gas, including the effects of hedges, is expected to average approximately $2.65-$2.85/Mcf. Total exploration and abandonment expense is expected to be approximately $27 million after taxes, including charges related to an unsuccessful well on its Lightning prospect, the first of three prospects Pioneer is drilling near its Falcon field in the deepwater Gulf of Mexico.

The Oil & Gas Asset Clearinghouse will hold its next Hybrid Live Floor/Internet Auction, offering 1,525 quality oil and gas properties combined into 253 lots, at the George R. Brown Convention Center in Houston on Jan. 30. For the third consecutive year, the clearinghouse has been selected to hold an auction in conjunction with the North American Prospect Expo (NAPE). Properties in the auction are located in 15 states. Sellers include BP, 3-TEC Energy, PITCO, Redstone Energy, Bass Enterprises, Permian Basin Acquisition Fund, Delta Petroleum, Yuma, Casillas Petroleum and many others. Some of the more notable properties being offered include Red River Production’s Ladder Creek Field in Cheyenne County, CO; Southwestern Energy’s Wattenberg Field in Weld County, CO; Harris Oil & Gas’ Victory Field in Haskell and Morton Counties, KS; and Bass Enterprises’ Leleux Field in Acadia Parish, LA. The properties can be previewed online through Data Room Explorer hosted on the Petroleum Place web site (www.petroleumplace.com). Data rooms, including complete seller files for most of the notable properties, are open through Jan. 27. Call the clearinghouse at (281) 873-4600 to schedule a data room appointment. A pre-sale conference will be held Jan. 29 at the convention center from 8 to 5 p.m. All seller files will be available for review at that time.

The New England Gas Association (NEGA) and the New York Gas Group (NYGAS) will merge to become the Northeast Gas Association (NGA), effective Jan. 1, 2003. The new organization will represent the local distribution companies, interstate pipeline companies, LNG importers, and associate companies involved in supporting the natural gas industry in the seven-state region of Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island and Vermont. Craig Frew, NEGA chairman, and Ralph Tedesco, chairman of the NYGAS Executive Committee announced the merger Tedesco, President and COO of New York State Electric and Gas (NYSEG), will be the first chairman of NGA. Dennis E. Welch, President and COO of Yankee Gas Services Company, will be the vice chairman. Thomas M. Kiley, who has served as President of NEGA and Acting Executive Director of NYGAS, will be President of NGA. NEGA and NYGAS first entered into an alliance in 2001, when they combined several administrative and management functions. The formation of the NGA is consistent with the increasing consolidation of the natural gas industry in the Northeast. The NGA will be administered at 75 Second Avenue, Suite 510, Needham, MA 02494, telephone: (781) 455-6800. A New York office will be located at 1515 Broadway, 43rd floor, New York, NY 10036, telephone: (212) 354-4790.

The California Legislature convened Monday in special session in Sacramento to deal with the state’s fiscal crisis that prompted Gov. Gray Davis to propose $10.2 billion in a combination of mid-fiscal year budget cuts and other savings. The state operates on a July-to-July fiscal year, and is facing a $21 to $30 billion deficit for the next fiscal year, 2003-04. Davis called the proposed cuts “severe” and likely difficult to implement midway through the fiscal year, but he said the state faces an “extraordinary challenge and no program will be held harmless.” State lawmakers, particularly members of his majority Democratic Party in each house, are expected to resist cuts in services to the needy. The legislature, which Davis called into two concurrent special sessions in 2001 to deal with the state’s energy crisis, will have to fashion legislation to implement the governor’s proposed cuts or come up with other ways to address the revenue shortfall that is principally due to the continuing economic downturn, particularly the decline in the dot-come sector that fueled large tax windfalls to the state in the late 1990s through mid-2000. Details of the governor’s proposed budget cuts are posted on the California finance department’s web site (www.dof.ca.gov).

BP started producing about 15,000 b/d of oil and 12 MMcf/d of gas from a single well at its Horn Mountain development in the Gulf of Mexico. Production from the facility, which is located in 5,400 feet of water 100 miles southeast of New Orleans, is expected to reach a peak rate next year of more than 65,000 b/d of oil and 68 MMcf/d of gas after a total of seven production wells are completed. BP started exploration on the field in July 1999 after acquiring leases in 1997 and 1998. The first discovery was announced in August 1999, and BP and partner Occidental Petroleum began delineation drilling immediately after that. The $600 million project, which includes the deepest free-floating dry tree drilling system in the world, went from discovery to production in about 40 months. It is expected to result in ultimate recovery of an estimated 150 million boe. BP is the operator and holds a 67% equity interest. Occidental Petroleum holds the remaining 33%.

The New York Mercantile Exchange (Nymex) has set new annual volume records with 110 million futures and options contracts changing hands through Oct. 25, which exceeded the previous record of 109.5 million set in 1999. Natural gas futures volume set a new record at 20.73 million, which exceeded the previous record of 19.2 million set in 1999. The exchange also broke volume records for, among other things, total options (21.98 million), Nymex Division futures and options (95.78 million), Nymex futures (75.87 million), energy futures and options (95.58 million) and energy futures (75.67 million). Exchange President J. Robert Collins said the records, along with a 30% increase in overall trading volume over the same period last year and record seat values on the NYMEX Division, show the industry’s confidence in the exchange and its method of trading. “Not evident in these numbers is over-the-counter clearing activity, which, since its introduction on May 31, has seen more than $1.1 billion in trades cleared at the Exchange,” he added.

Diamond Offshore Drilling Inc. said Tuesday that its semisubmersible Ocean Lexington drilling unit, which parted its moorings during Hurricane Lili last week, has been towed back to its original, pre-storm location and is preparing to recommence operations. The company said that a top-side inspection and an underwater examination of the lower hulls has determined that the rig is undamaged. The company reported late last week that Lili detached Ocean Lexington from its moorings and blew the drilling rig 45 miles before it grounded in 35 feet of water offshore Louisiana (see Daily GPI, Oct. 7).