Forecast

In a new report, the Minerals Management Service has updated its Gulf of Mexico forecast for daily oil and gas production, predicting that between now and 2005, gas production will be 11.10 Bcf/d to 16.54 Bcf/d and oil production will be 1.526 MMbbl/d to 1.967 MMbbl/d. The greatest potential for development, said the federal agency, is in deepwater of 1,000 feet or more.

In just three years, the Burgos Basin in northern Mexico could be producing as much as 1.4 Bcf/d, which would add to the country’s current production level of 4.6 Bcf/d, according to Mexico Energy Minister Ernesto Martens. Of the current total, about 970 MMcf/d already is produced in the massive dry gas basin.

First quarter profits for Tucson-based UniSource Energy Corp. are expected to come in well ahead of analysts’ estimates because of strong retail and wholesale sales by subsidiary Tucson Electric Power Co. TEP’s retail and wholesale sales rose 3% in January and 8% in February over a year ago.

Slightly constructive long-lead weather forecasts and animportant technical signal prompted natural gas futures to arrestdownward momentum yesterday and eke out a narrow gain in a quietsession. Many traders elected to wait on the sidelines for aclearer price picture to develop.

Sonat said it anticipates storage injections will exceed thedaily capacity of its storage fields this week. The weatherforecast is for a continued warming trend through Friday, andinstead of receipt nominations going down they actually went up forthe gas day of Wednesday, the company said. If Southern does notsee a reduction in receipt nominations for Thursday’s gas day it ishighly likely that it will have to implement an OFO.

A weather forecast that had ignited bullish hopes late last week(see Daily GPI, Feb. 2) appeared to begetting heavily discounted Monday. The result was huge downturns inboth cash and futures prices. California led the way with dollar-plusdrops, and all other markets were falling between about 50 cents and adollar.

Based on current withdrawal rates, working gas inventory andanticipated load forecast, Questar said Thursday it expects to go intocompressed withdrawal mode at the Clay Basin storage facility withinthe next three to seven days. This prompted concern by Northwest thatsuch an action will cause it “to begin to accumulate unmanageablelevels of condensate liquids at its Green River [WY] compressorstation similar to last year, when Questar had to reduce its confirmedquantities to Northwest” (see Daily GPI,Feb. 14, 2000; Feb. 23, 2000). Bothpipes said they are working together to manage liquids at GreenRiver. Questar noted that to mitigate future impact, it plans to builda dewpoint plant at Clay Basin. Permitting is under way andcompletion is expected in late summer, Questar said. A pipelinerepresentative said “compressed withdrawal” is the difference betweenfree flow, which is the normal operational mode for Clay Basin untilabout mid-January each year, and using compressors to suck gas out ofthe ground. Currently Clay Basin is about 32% full for thenon-Questar-contracted 54 million dekatherms held by seven or eightmajor customers including Northwest, he said. Using compression inwithdrawals heats the gas so it takes longer to cool down and for theliquids to condense out of it; thus the liquids tend to form afterit’s gotten out into the pipeline, he said.

Williams said it expected its OFO (see Daily GPI, Dec. 12) to expire at the beginning oftoday’s gas day “based upon the latest weather forecast that we havereceived.” However, as of late Wednesday afternoon no cancellationnotice had been posted.

Fueled by moderating weather forecasts and following Monday’s21-cent decline, natural gas futures tumbled lower in a classicexpiration-day long liquidation Tuesday, as traders rolled theirprompt month positions into back months. After a back-breakingsell-off in the last five minutes of trading Monday, the Decembercontract gapped lower at the open and tumbled 35.2 cents to itsfinal resting place at $6.016 yesterday.