Start

California’s second merchant underground natural gas storage project prepares to start up commercial operations the week of Dec. 17 at Lodi, CA, about 50 miles south of Sacramento, but it backers at Houston-based Western Hub Properties still face two pieces of unfinished business.

Despite record natural gas drilling begun in 2000 and boosted through mid-year, U.S. production may actually show a year-over-year decline by the time fourth quarter reports are released, according to energy analysts following quarterly reports by exploration and production (E&P) companies. However, in Canada, September natural gas production is up and will be up at the end of the year, putting more pressure on prices and E&P values both in the Lower 48 and Canada as pipeline capacity fills up.

Pioneer Natural Resources and Mariner Energy announced plans to start producing up to 175 MMcf/d of gas in early 2003 from the Falcon field in the deepwater Gulf of Mexico. Gas reserves currently are estimated to range from 175 to 240 Bcfe. The Falcon field is located 100 miles east of Corpus Christi in 3,400 feet of water in East Breaks 579/623 and is among four major prospects Pioneer expects will boost its production by up to 50% over the next two years.

Pioneer Natural Resources and Mariner Energy announced plans to start producing up to 175 MMcf/d of gas in early 2003 from the Falcon field in the deepwater Gulf of Mexico. Gas reserves currently are estimated to range from 175 to 240 Bcfe. The Falcon field is located 100 miles east of Corpus Christi in 3,400 feet of water in East Breaks 579/623 and is among four major prospects Pioneer expects will boost its production by up to 50% over the next two years.

California’s fledgling Consumer Power and Conservation Financing Authority (power authority) last week continued its breakneck start-up, announcing its pursuit of various gas-fired and renewable power generation projects that are aimed at giving the state another 3,000 MW online by next summer. In addition, the power authority said it has posted on its web site (www.capowerauthority.ca.gov) a draft request for bids for microturbine, solar and fuel cell projects.

The August aftermarket got off to a fairly strong start Tuesday. Most points ranged from about a nickel to as much as a quarter above end-of-July numbers, although a few scattered points registered moderate declines. Advances over apparent August indexes also ranged from just a few cents to more than 20 cents in many cases, but the Rockies/San Juan market tended to be as much as half a dollar over index on several pipes.

Many observers were expecting a rebound yesterday, but got little confirmation that technical factors would support much of a change in direction. The August contract barely managed to halt the long decline. After slipping more than 22 cents in its first two trading sessions as the near-month contract, August struggled to muster a 2.1-cent daily gain, closing at $3.117, about a nickle off its daily high and 6.7 cents off its low of $3.050.

California regulators this week could start to lessen some of the uncertainty surrounding the in-state markets in the first of a series of natural gas infrastructure expansion decisions that ultimately could greatly expand the two major utility intra-state transmission/storage systems and make it easier for new interstate expansion projects into the state to get completed.

The Ottawa government needs to invest at least C$100 million in the Arctic to jump start economic development there, according to a report released last week by the National Round Table on the Environment and the Economy. Aside from additional investments in infrastructure or the proposed natural gas pipeline, the report noted money is needed now to improve the regulatory and investment climate in the region.