NGI The Weekly Gas Market Report

Forecasters expecting the long standing storage deficit compared to last year’s levels to be wiped out on Wednesday got their wish. With the winter gas futures months holding attractive premiums for storage arbitrage and gas demand apparently reduced because of high winter prices, an unprecedented series of weekly storage injections over the past five weeks has led to a year-to-year surplus for the first time since January 2000.

As long as prices remain near the current level, the liquefied natural gas market will play a “big role” in both Europe and the United States in the coming years, and with a current growth rate of 8%, LNG will be a “key growth engine” for many of the world’s majors, according to Deutsche Bank analysts, who offered their global assessment of the marketplace Wednesday.

Silicon Valley met the energy crisis and backed off, clearing the way for Calpine Corp. and joint-venture partner, Bechtel, to develop a $400 million, 600 MW, natural gas-fired power plant, the Metcalf Energy Center, at the southern-most end of San Jose, CA. If all goes well, Calpine will begin construction this year and have the power plant running by summer 2003.

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Montana Power last week offered up plenty of signs that it is ready to fight tooth and nail over a move by the Montana Public Service Commission (MPSC) to assert authority over the rates Montana Power can charge default supply customers. The utility worries that the state commission’s stance could ultimately put it in the position of having to buy power at high market prices and selling that same power at below market prices.

American Electric Power completed its purchase Friday of Enron Corp.’s intrastate natural gas pipeline subsidiary, Houston Pipe Line Co. The $726.6 million transaction gives AEP, headquartered in Columbus, OH, a 30-year pre-paid lease related to the operation of one of North America’s largest storage facilities, the Bammel Storage Facility and HPL’s inventory.

The Federal Energy Regulatory Commission (FERC) gave Iroquois’ $174 million Eastchester Expansion Project its preliminary approval on non-environmental grounds. The 33-mile pipeline expansion is designed to deliver 230,000 Dth/d mainly to power generators in New York City. It will connect Iroquois’ existing system in Suffolk County with Consolidated Edison’s system in the Bronx. Iroquois hopes to complete the pipeline extension by November 2002.

Gulfstream Natural Gas System, LLC broke ground last Thursday on its $1.6 billion, 753-mile pipeline under the Gulf of Mexico from Mississippi and Alabama to Florida. The target for completion is June, 2002.

Gas volumes among the top 20 North American marketers continued to show significant growth in the first quarter of the year with nearly a 40 Bcf/d rise in volumes compared to 1Q2000 and a 14.9 Bcf/d increase compared to 4Q2000 (see Table). The big volume gainers for the quarter (1Q2001 versus 1Q2000) were El Paso, Enron, BP, Mirant, Sempra and Reliant, while the only volume decreases in the top 20 were posted by Coral, Aquila and Williams.