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Big IPP Calpine Tackling Gas Management
One of the nation’s fastest growing nonutility power plantdeveloper/operators, Calpine Corp., San Jose, CA, is taking ahands-on approach to building a diversified natural gas portfolioto fuel what it eventually hopes is a network of highly efficient,environmentally clean combined-cycle power plants with a collectivecapacity of 25,000 megawatts.
MMS Beginning RIK Pilot in the GOM
The Department of the Interior’s Minerals Management Service(MMS) is beginning its third royalty-in-kind (RIK) pilot, puttingit in the business of selling Gulf of Mexico (GOM) gas productionit accepts in place of cash royalties. The pilot is intended totest a different approach to RIK, using a competitive auction tomove up to 260 MMBtu/d initially.
Rule Issued for Royalty Valuation on Indian Lands
The Interior Department’s Minerals Management Service (MMS) hasissued a final rule for determining royalties for natural gasproduced on Indian lands. Under the new rule, which was publishedin the Aug. 10 Federal Register, Indian leases would have theoption to either compute royalties on wellhead gas using apublished price index, continue using the existing gross-proceedsmethod for arms-length contracts, or use the current MMS benchmarksystem for non-arms-length sales. If gas is processed, Indiantribes then would adopt a “dual accounting” method under whichroyalties would be based on whichever has the greater value for gas- before processing or after processing. In most cases, it’s thelatter.
KCBT Still Shooting Blanks
The Kansas City Board of Trade (KCBT) had an estimated volumefor the first time this month yesterday, but the Board’s managementis not concerned about the overall lack of trading. The KCBT hasrecognized the problem and is in discussions with its customers onhow it can bring its trading floor more to life, a spokespersonsaid, but others openly wonder if there will be a gas pit at theKCBT much longer.
Rule Issued for Royalty Valuation on Indian Lands
The Interior Department’s Minerals Management Service (MMS) hasissued a final rule for determining royalties for natural gasproduced on Indian lands. Under the new rule, which was publishedin Tuesday’s Federal Register, Indian leases would have the optionto either direct producers to compute royalties on wellhead gasusing a published price index, continue using the existinggross-proceeds method for arms-length contracts, or use the currentMMS benchmark system for non-arms-length sales. If gas isprocessed, Indian tribes then could adopt a “dual accounting”method under which royalties would be based on whichever stage hasthe greater value for gas – before processing or after processing.In most cases, it’s the latter.
Industry Briefs
Southern California Gas Co. (SoCalGas) launched its newestversion of GasSelect, an automated gas scheduling and energymanagement system. The e-commerce application is available tosubscribers through www.gasselect.com for real-time submission ofgas nominations, trading gas delivery imbalances in a secondarymarket, and for gas consumption information from electronic metersinstalled at customer sites. GasSelect is used to manage thedelivery of 1 Tcf into Southern California for both SoCalGas andSan Diego Gas & Electric.
MMS, the 800 MMcf/d Gorilla, Swings into Gas Market
With at least 800 MMcf/d and potentially more than 1 Bcf/d of gas supply to sell, the Minerals Management Service (MMS) will be a major force in the gas market come October when its Gulf of Mexico Royalty In-Kind (RIK) pilot program begins. MMS’ total royalty share of Gulf production is about 2.5 Bcf/d, and by next spring it expects at least a third of that will be taken in kind in lieu of cash payments.
RIK Will Give MMS Gas Market Muscle
With at least 800 MMcf/d and potentially more than 1 Bcf/d ofgas supply to sell, the Minerals Management Service (MMS) will be amajor force in the gas market come October when its Gulf of MexicoRoyalty In-Kind (RIK) pilot program begins. MMS’ total royaltyshare of Gulf production is 2.5 Bcf/d and it expects at least athird of that will be taken in kind by next spring.
In Brief
The Interior Department’s Minerals Management Service hasscheduled a meeting in Houston to discuss implementation of itsGulf of Mexico Royalty In-Kind pilot program, which is slated tobegin in October. The three-year program will involve thecollection and sale of as much as 800 MMcf/d of royalty gas fromfederal leases in the Gulf. It is the MMS’s third RIK pilot, all ofwhich are being conducted to determine the feasibility andeconomics of accepting royalties in kind rather that as a cashpayment from lessees. The meeting on the Gulf RIK will begin at 10a.m. on July 20 at the MMS Houston Compliance Division Office RM104, 4141 Sam Houston Parkway East. It is open to the publicwithout reservation. Lessees, operators, payers and potentialpurchasers are encouraged to attend.