Crunch

This week’s power and gas crunch in California, driving pricesskyrocketing for both, provided a glimpse of what merchant storageoperators need to make their operations more profitable, accordingto the state’s first nonutility underground storage project, WildGoose Storage. More price volatility and closer tracking betweenelectricity and natural gas prices makes merchant storage morevaluable.

Producers – and the lawyers, brokers and analysts they break bread with – last week received a second helping of what was for lunch eight months ago at Houston’s Petroleum Club: a bullish outlook for gas prices.

In an attempt to better support record-breaking power demand inthe Midwest, OG&E Electric Services (OG&E), an OGE Corp.subsidiary, said yesterday it plans to reactivate two powergenerators at its Mustang Power Plant. The utility is alsoconsidering other enhancement projects, with a goal to add 1,000 MWto its power supply system.

While no one is ringing the alarm bell and shouting about asupply crunch, near-term Gulf of Mexico gas supplies are expectedby many to suffer from depletions and diminished drilling due tolow prices.