Rights

Gas supply this year is expected to fall below last year’slevels and will struggle to meet projected demand, the IndependentPetroleum Association of America indicated in a report released toinvestors in New York yesterday. With the gas rig count down abouta third compared to 1998 levels, U.S. production is expected to bedown 1.2% this year to 18.75 Tcf, while gas imports are expected torise 2.7% to about 3.22 Tcf, and gas demand is expected to shoot up3.2% to 21.97 Tcf.

Faced with conflicting reports about the need for new pipelinecapacity to serve the Northeast quadrant of the country, theFederal Energy Regulatory Commission last week called for aninquiry into the area’s projected demand for natural gas over thenext 20 years.

The renewable-fuel mandate in the Clinton administration’sretail electricity restructuring legislation that was unveiled lastweek may be seen by the natural gas industry as its worst nightmarecome true, but it does have a little bit of a silver lining.Although it sets aside 7.5% of gross annual generation output forrenewable fuel sources, which is at least triple the current level,the full effect of the mandate won’t be felt until the end of thenext decade at the earliest.

With possible national implications, California has proposed astate law that would impose “public goods” surcharges on all gassold for consumption within the state, including gas delivered byseveral proposed federally-regulated interstate pipelines that seekto bypass local distributors and directly serve large industrialcustomers. The fees would support energy efficiency,weatherization, public interest energy research and development,and low-income programs. The proposed change undergoes its firstpublic scrutiny in a legislative committee hearing in Sacramento onApril 19. If passed it is sure to splinter the gas industry betweenintra-and interstate interests.

The Clinton administration’s retail electricity restructuringbill that was unveiled yesterday had some bad and not-so-bad newsfor natural gas. The bad news was that it requires a maximum 7.5%of annual electricity output to be generated by renewable fuelsources, but on the brighter side the full effect won’t be feltuntil the end of the next decade at the earliest.

The D.C. Circuit Court of Appeals has remanded FERC’s rejectionof a 1997 complaint in which Southern California Edison accusedSouthern California Gas (SoCalGas) of gaming the secondary marketfor firm capacity on key transportation links between the low-costSan Juan producing basin and the California border.

Unocal Corp.’s Spirit Energy 76 unit announced a “verysignificant” oil and gas discovery on the Mad Dog prospect in theGulf of Mexico deep-water Green Canyon block 826. The wellencountered 300 net feet of hydrocarbons, mainly crude oil. Aspokeswoman said more specific information about how much of MadDog reserves might be gas is not yet available.

Shell Exploration &amp Production Co. (SEPCo) outlined a planlast week to develop its strategic Gulf of Mexico (GOM) assetswhile cutting back on other deep-water projects. The plan includescommencing development on Shell’s 17th GOM project, the Brutus oiland gas play, while cutting up to $1.1 billion in E&ampP costs by2001. Shell’s 17 Gulf projects are the most of any GOM producer.

Supported by the largest increase in imported Canadian gas since1995, total natural gas imports rose for the 11th straight year in1998, according to a recent Department of Energy (DOE) report.