Gulf

Mostly moderate price declines concentrated in the Gulf Coastand Northeast were outweighed Wednesday by small to large increasesin other markets. The biggest gains were in California and theRockies/Southwest, while Transco Zone 6 (NYC) took the biggest hitof 65 cents.

All three major Gulf Coast/Northeast interstate pipes —Tennesseee, Texas Eastern (Tetco) and Transco — issued shipperwarnings Thursday about receipts into their systems laggingconsiderably behind market-area deliveries. Tennessee issued aBalancing Alert OFO, effective today until further notice, to 39shippers (applying to more than one contract in some cases). A penaltyof $15/Dth “plus the applicable regional daily spot price” toovertakes from delivery meters or underdeliveries at receipt pointsthat exceed 2% or 500 Dth, whichever is greater, of scheduledquantities. Tennessee also is reducing today its normal SupplyAggregation (SA) contract imbalance tolerance of 1,000 dekatherms to500 dekatherms across all supply area pools. The tolerance for marketarea pools remains at zero, the pipeline said. Tetco said allpreviously announced restrictions (see Daily GPI, Dec. 21) would remain in effect untilfurther notice and added two more that take effect today: all IT-1volumes, including backhauls, received or delivered in the Access Areawill not be scheduled; and no nominations for interruptible orsecondary service will be accepted at the Oakford, Leidy andLambertville points. Transco cut the 4% tolerance currently allowed atits pooling points to 1% or 1,000 Dth, whichever is greater, fornegative imbalances. Shippers with positively scheduled poolimbalances will continue to be held to the 4% tolerance level. Transcoadded that it may proactively decrease markets to bring them in linewith supplies at pooling points.

Mitchell Energy announced that follow-up drilling in two TexasGulf coast exploratory plays has increased natural gas productionby 30 MMcf/d and oil production by 550 b/d. For November, thecompany’s overall daily production averaged 344 MMcf of gas and5,400 bbl of oil, excluding the effect of a two-day shutdown of itsBridgeport plant to complete connections that will increase theplant’s throughput capacity by 50% in late December. “Discovery ofthe Lower Wilcox and Lake Creek area wells is another example ofour ability to combine 3-D seismic technology with our extensiveknowledge in core field areas to add new reserves,” said CEO GeorgeP. Mitchell. “While the Barnett shale play in North Texas isclearly the driver for much of the company’s volume growth,drilling in our other core areas can also be quite attractive andadd significant production as well.”

Prices continued to soar Tuesday but generally by smalleramounts than on Monday in the Gulf Coast, Midcontinent/Midwest,Appalachia and Southwest/Rockies. However, bigger gains at thefrigid Northeast citygates allowed them to join California and thePacific Northwest in measuring average pricing in four digits.

To encourage drilling of marginal deep-water wells (200 metersand greater) in the Gulf of Mexico, the Minerals Management Service(MMS) has proposed a new rule expanding discretionary royaltyrelief for properties that would otherwise be considereduneconomic.

Dallas-based Pioneer Natural Resources Co. said it plans toacquire the working interests in 12 non-producing Gulf of Mexicoblocks from a Baker Hughes Inc. subsidiary for $23 million. Theproperties include a one-third interest in the Marathon-operatedCamden Hills natural gas discovery in Mississippi Canyon 348, whichis expected to have gas production in 2002.

What do you get when you pair a fizzling Gulf Coast tropicalstorm with mild temperatures across much of the U.S.? If youanswered “lower natural gas prices,” then you were right yesterday.

Blue Dolphin Energy has signed an agreement to build a gaspipeline in the Gulf of Mexico to transport 120 MMcf/d ofproduction for Vastar Resources. The new 3.4-mile, 12-inch diameterline will be designed to accommodate production from High IslandA-5 to Blue Dolphin’s Black Marlin Pipeline in High Island BlockA-6. Transportation service is expected to commence in 60 days.Blue Dolphin will own a 50% interest in the new pipeline at anestimated net cost of $1.1 million. It owns a 50% interest andoperates the Black Marlin Pipeline system, which currentlytransports 120 MMcf/d. Black Marlin has capacity to transport 200MMcf/d. Blue Dolphin Energy Company is engaged in the acquisitionand exploration of oil and gas properties, and the gathering andtransportation of natural gas and condensate.

Coastal Oil and Gas has announced it is selling its interests in36 offshore oil and gas holdings. The offshore leases are locatedin the Gulf of Mexico, in blocks ranging from offshore of Alabamato south of Texas. When asked about the reasons for selling theseleases, spokesperson Dorothy Beeler said it was just “ongoingportfolio asset management,” and that it had nothing to do withCoastal’s planned merger with El Paso Energy.