Rates

Oilfield services rates began to fall in the final three months of 2006, and there’s “room for more price decreases through 2007,” Chesapeake Energy Corp. CEO Aubrey McClendon said Friday. Chesapeake’s goal is to cut service costs this year by as much as 10-15%, but the CEO said the price of natural gas will be the final determinant.

Tennessee Gas lifted its operational flow order action alert in its market zones (0, L, 1, 2 and 3), but maintained the alert in the market area (zones 4, 5 and 6). Actual daily flow rates cannot exceed 2% or 500 Dth, whichever is greater, of scheduled quantities or else the shipper will pay a 22 cents/Dth penalty.

Louisville Gas and Electric Co. (LG&E) filed with the Kentucky Public Service Commission to decrease the gas supply clause (GSC) component of its retail rates for consumption Feb. 1 toApril 30, 2007. The newly filed GSC factor of 65.666 cents per 100 cubic feet is a reduction of 11.082 cents from the current rate of 76.748 cents. By comparison, the rate for Feb. 1, 2006 was 127.454 cents.

For the first time in four years, the Idaho Public Utilities Commission Thursday approved almost a 4% decrease in rates for Intermountain Gas Co., effective Sunday (Oct. 1), due to what the regulators characterized as falling wholesale natural gas prices and the utility’s gas buying/storage strategies. The move was part of the annual purchased gas adjustment (PGA) process for the utility’s 275,000 customers in Idaho.

With the current production decline rates in the Gulf of Mexico and restricted access to a number of mineral-rich regions across the U.S., producers are having to look in untraditional places to keep up with the country’s thirst for natural gas. On Wednesday, Ladera Ranch, CA-based Victory Energy Corp. said it has secured participation in a joint venture for the Mesa Prospect in New Mexico with Eldorado Exploration.

Mild winter weather and sharply falling commodity costs have led utilities across the country to reduce their rates. Philadelphia-based PECO said this week that it will reduce its commodity rate by 6.5% as of March 1, resulting in lower natural gas bills for the company’s suburban natural gas customers. The commodity charge makes up more than 80% of the total gas rate, which will drop by 5.2%.

Honeoye Storage Corp. said it has 225,000 Dekatherms of firm space available under market-based rates at its Rochester, NY storage field for the current storage season. Interested parties should contact the company immediately for service beginning Jan. 25 and ending on Dec. 15. “The service will have a maximum daily injection rate of 10,000 Dth/d from Jan. 25 to Feb. 28 and a maximum withdrawal rate of 5,000 Dth/d, from Nov. 1 through Dec. 15,” said Honeoye President David A. T. Donohue. “Honeoye will provide all required cushion gas. Full details of the offering are to be found on our website: www.honeoyestorage.com. The Honeoye Field began operations in 1975 and five of its original customers, or their affiliates, continue to receive 4,293 MDth of service. The facility interconnects with Tennessee Gas Pipeline east of Rochester. Customers committing to Honeoye firm service will need to make their own transportation arrangements to and from the Honeoye interconnection. Honeoye is owned by an affiliate of KeySpan Energy Corp., Consolidated Energy Co. and its three developers: Dave Donohue, Dick Norman and Jacek Makowski. For details contact Richard A. Norman at (617) 367-0032, honeoye@essexhydro.com or James Smoot at (585) 229-5161, fax: (585)229-2015, email: jwsmoot@honeoyestorage.com.

Citing “a combination of receipt underperformance and takes in excess of scheduled quantities,” El Paso said Wednesday its system “is being drafted at rates that are not sustainable.” It added that performance caps will be placed on receipt points that are not performing up to scheduled quantities and urged shippers to bring their supplies in balance with their takes. Shippers owing gas to El Paso can arrange to pay gas back, the pipeline said, but if the situation fails to improve, a declaration of Strained Operating Condition may be required.

The Sable Offshore Energy Project (SOEP), whose operators in 1998 boasted possible production rates as high as 500 MMcf/d (see Daily GPI, Feb. 13, 1998), is now in “terminal” decline, and the sixth and final field in the project, which was scheduled to ramp up in 2007, may be written off, according to a study by a Dalhousie University engineering professor.