NGI The Weekly Gas Market Report

Although there remains a dearth of retail electricity choice in Ohio, residents can take some comfort in knowing that they are protected by a wide range of consumer standards, and that the state will not ignore attempts to abuse Ohio’s evolving energy marketplace, according to a new report issued last Tuesday by the Ohio Consumers’ Counsel.

The largest liquefied natural gas (LNG) import terminal in the United States just received authorization from the Federal Energy Regulatory Commission (FERC) to become even larger. CMS Trunkline LNG will expand the peak send-out capacity of its terminal in Lake Charles, LA, this summer to 1 Bcf/d from 700 MMcf/d (see NGI, Feb. 26).

“I don’t think there’s a darn thing the [Bush] administration can do” to rescue California from the inevitability of energy supply shortages and blackouts this summer, a White House energy official said last week.

A panel of Alaskan and Canadian politicians painted a colorful picture in Houston last week of why pipeline construction to the Lower 48 from Alaska has never been more urgent — or more confusing. Unanimous in their belief that the North Slope could deliver needed gas supplies, they still could not agree on where or how many pipelines should be built.

Regulatory approval by the government in Western Australia will allow Chevron Australia Pty Ltd. to move forward with a $1.6 billion expansion of its Australian LNG facilities, the North West Shelf Venture (NWSV) near Karratha, Western Australia. The expansion, which is designed mainly to increase exports to Japan and Pacific Rim countries, also would provide increased LNG shipments to the United States — including a potential new import terminal on the West Coast (see NGI, March 26).

As the traditional storage withdrawal season came to an end last week with working gas near record lows at 627 Bcf (19% full) and 404 Bcf lower than the same time last year, there were mixed opinions on Wall Street about what the 2001 refill season might hold. Lehman Brothers and Salomon Smith Barney warned that storage might be refilled at a record rate this year, possibly prompting a bearish reaction in the market in the short-term despite the extremely low level of working gas currently. Meanwhile, UBS Warburg and IFR Pegasus said that scenario was very unlikely.

Enron Energy Services (EES) continued on its quick pace of business in 2001 as it reported that it has entered into two long-term agreements to manage energy supplies with large retailers last week. EES will manage the energy needs for all of Saks Inc.’s store locations, distribution facilities and administrative offices in 39 states. EES also teamed with J.C. Penney Co. to cover the acquisition of about $600 million in energy-related commodities for its retail locations. Terms of the Saks deal were not disclosed.

The staff of the Public Utilities Commission of Nevada has determined that Southwest Gas overpaid for natural gas last summer by about $8.13 million because of a poor hedging program and over-reliance on the spot market. As a result, the staff has recommended that amount be taken out of a rate balancing account and that the utility be ordered to improve its risk management practices.

Only sharply higher-than-expected production performance or a sharper-than-anticipated downturn in industrial activity this year will prevent continued pressure on natural gas spot prices in the $4-$5 range, according to the Energy Information Administration’s Short-Term Energy Outlook for April 2001.