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Western region gas traders have caused a growth spurt over thepast couple of weeks in the Kansas City Board of Trade’s WesternNatural Gas Futures Contract. The contract has developed a habit ofbreaking open interest records every few days. Open interest jumpedby more than 1,000 contracts from Wednesday to Thursday last week.Such moves at the little Midcontinent exchange may seem small whencompared to other exchanges but they have raised some eyebrows inthe gas marketplace.

The way FERC figures pass-through of costs in oil pipeline ratecases could hamper future use of converted lines, according toCommissioner Vicky A. Bailey, who issued dissenting opinions in twooil pipeline cases involving Rio Grande and Longhorn PartnersPipelines [OR97-1-001 and OR95-7]. In both cases the Commissionruled that the companies would not be allowed to pass through thefull purchase price of the pipelines, only the depreciated originalcost of the line. “In an area where Congress has asked us toexercise regulatory restraint we turn around and apply textbookprinciples in a manner that may discourage future conversions ofoil pipelines to new uses,” Bailey said. The orders examine thecorporate relationships between the companies to arrive at theconclusion that the companies are selling assets to themselves. ButBailey believes arguments about corporate ties in these cases don’tapply. She was joined by Commissioner Curt Hebert.

Few areas were getting below 32 degrees (F) Thursday, but cashprices seemed to be frozen in place everywhere. The market was muchlike the landscape around Houston, one source said: flat in alldirections.

The March Nymex contract inched 3.2 cents higher to $2.270 onThursday, amid a session sources agreed was once again dominated bytechnicals. “This looks like a very strong trading range, sotoday’s result was to be expected,” a trader said. “March drifted afew cents toward the bottom of its range on Wednesday, so it makessense the contract would move higher today. Because the tradingrange is so tight right now, that is limiting how much March can goup,” he said.

Gordon Shearer, president of Cabot LNG Corp., said he knew if hewaited long enough, liquefied natural gas would have its day in themarketplace. That appears about to happen, at least in New England,where Cabot finds itself positioned to meet growing market demandwith LNG imported from thousands of miles away. At the CambridgeEnergy Research Associates 17th annual executive conference inHouston this week, Shearer enumerated factors growing New Englandgas demand and explained how LNG can economically meet some of thatdemand.

Tennessee Gas Pipeline has filed plans to increase capacity onsix separate pipelines in the Gulf of Mexico that together wouldrepresent an increase of over 720 MMcf/d in offshore lines owned byTennessee and other parties and a net increase in deliverabilityout of the Gulf of 200 MMcf/d.

In a deal that could be the first of its kind in the nation,Pacific Gas and Electric is locked in serious negotiations withnorthern California natural gas producers to sell them itsextensive utility gas gathering system linked to in-state wells,most of which are in the dry gas fields of the greater SacramentoValley. The deal being sought, which is expected to take the betterpart of 1998 to gain final regulatory approvals, is an offshoot ofthe omnibus Gas Accord unbundled intrastate transmission andstorage services that start March 1. The parties will not put adollar value on the facilities involved in the negotiations, but itis conservatively estimated at tens-if not hundreds-of millions ofdollars, involving hundreds of miles of low- and medium-pressurepipelines and related gathering facilities linked to more than 100producers.

In the official launch of the $3 billion Sable Offshore EnergyProject (SOEP) in Halifax earlier this week, project owners raisedexpectations for gas reserves and production. “Our ongoingtechnical studies and interpretation of the 3-D seismic informationgathered in 1996 and 1997 show that the potential exists for morethan the 3.1 Tcf we estimated as the basis for our development planapplication,” said Mobil Oil Canada President Jerry Anderson. “Thegood news is that we might expect to recover more than 3.5 Tcf.This larger potential resource base will enable us to increaseinitial production rates to more than 500 MMcf/d, depending on suchfactors as markets, well performance and operating efficiency.” Theowners originally expected 460 MMcf/d. The additional production,however, will be within the facilities design capacity of 554MMcf/d, they said.

The way FERC figures pass-through of costs in oil pipeline ratecases could hamper future use of converted lines, according toCommissioner Linda T. Key Breathitt, who issued dissenting opinionsin two oil pipeline cases involving Rio Grande and LonghornPartners Pipelines [OR97-1-001 and OR95-7]. In both cases theCommission ruled that the companies would not be allowed to passthrough the full purchase price of the pipelines, only thedepreciated original cost of the line. “In an area where Congresshas asked us to exercise regulatory restraint we turn around andapply textbook principles in a manner that may discourage futureconversions of oil pipelines to new uses,” Breathitt said. Theorders examine the corporate relationships between the companies toarrive at the conclusion that the companies are selling assets tothemselves. But Breathitt believes arguments about corporate tiesin these cases don’t apply. She was joined by Commissioner CurtHebert.