NGI The Weekly Gas Market Report

In a new report, the Minerals Management Service has updated its Gulf of Mexico forecast for daily oil and gas production, predicting that between now and 2005, gas production will be 11.10 Bcf/d to 16.54 Bcf/d and oil production will be 1.526 MMbbl/d to 1.967 MMbbl/d. The greatest potential for development, said the federal agency, is in deepwater of 1,000 feet or more.

Phillips Alaska, Inc., a wholly owned subsidiary of Phillips Petroleum Co., and Anadarko Petroleum Corp. jointly announced last week the first discoveries in the National Petroleum Reserve-Alaska (NPR-A) since the area was re-opened to exploration in 1999. The NPR-A is situated west of the Colville River on Alaska’s North Slope.

Looking to enhance its ability to ensure competitive and efficient wholesale electric power markets in the New England region, ISO New England Inc. last Wednesday unveiled a series of actions that the ISO said will allow it to more effectively identify and deter market-detrimental behavior such as attempts to manipulate wholesale markets and drive up electricity prices.

Alcoa Inc. has recently agreed to shut down an energy-intensive aluminum smelter in Washington to help ease the growing power crunch in the Pacific Northwest region.

The month of May is almost gone and support in the California legislature for the governor’s deal with Southern California Edison was still missing last week, so Republican members crafted an alternative that would not involve sale of the utility’s transmission assets to the state. In the meantime, Democratic state legislative leaders took aim at FERC as did most of the rest of the state government’s elected and appointed officials.

Discounting reports from other Wall Street analysts about permanent gas “demand destruction” and rapid supply growth being the causes of the current price collapse, Robert Christensen of First Albany Corp. said prices have fallen mainly in reaction to strong storage injections this spring and probably will rebound because of minimal supply growth. Christensen released a report last week titled “Still a `No Show’- Natural Gas Supply Growth” that makes a case for remaining bullish in the face of rapidly declining spot prices.

In just three years, the Burgos Basin in northern Mexico could be producing as much as 1.4 Bcf/d, which would add to the country’s current production level of 4.6 Bcf/d, according to Mexico Energy Minister Ernesto Martens. Of the current total, about 970 MMcf/d already is produced in the massive dry gas basin.

As natural gas demand, spurred by new gas-fired generation, continues to grow within the United States, the country would be wise to look toward Alaska and its northern neighbor Canada for an increased supply from the significant untapped potential that remains along the vast landscape, according to the Canadian Association of Petroleum Producers (CAPP). Supplies from Canada, which currently account for 15% of gas consumption in the United States, have the potential to grow, as long as infrastructure is put in place and regulatory processes are ironed out.

Banks providing credit lines to Southern California Edison and its parent, Edison International, have extended their forbearance in recognition that they expect the utilities deal (MOU) with California’s governor will eventually be implemented to help restore credit-worthiness, Edison officials said last Tuesday as part of a conference call with the financial community dealing with the company’s first-quarter earnings report.