NGI The Weekly Gas Market Report

Surprise, even shock, are common reactions to what occurs on theNew York Mercantile Exchange on expiration day of a spot month gasfutures contract, but last Wednesday was especially traumatic forsome natural gas traders. Not because of price volatility, however.At about 1:50 p.m. EST, someone at the Teleport CommunicationsGroup, the telephone carrier that supports the lines on the tradingfloors of the Nymex, pulled the plug. All commodity trading,including of course gas futures, screeched to a halt, creating whatappeared to be a hair-raising state of panic. As it turned out,however, the event actually seemed to dilute what normally is themost volatile trading period of a monthly contract – the last hourof trading.

A recommended state approval of the proposed $5 billion mergerbetween Los Angeles-based Pacific Enterprises and neighboring SanDiego-based Enova Corp. is drawing qualified praise from the twoutility holding companies that want to combine into a new entitynamed Sempra Energy. However, they will be asking the CaliforniaPublic Utilities Commission to allow more time to capture greatersavings from the corporate marriage, which will create the largestaggregation of energy customers in the nation-more than 6 million(4.7 million for Southern California Gas and 1.3 million at SanDiego Gas and Electric). CPUC action could come at its March 26meeting.

Natural gas producers scored a big victory last week when theFederal Energy Regulatory Commission opened the door for them topost surety bonds in lieu of the multi-million-dollar refunds tocustomers that are due to be paid by March 9th.

The Federal Energy Regulatory Commission gave the go-ahead lastweek for two New England Electric System (NEES) utility companiesto sell their fossil fuel and hydro generation business to USGenNew England Inc. (USGen), a subsidiary of PG&ampE Corp.

After a pause for consideration by one potential taker,TransCanada PipeLines, Canada’s second-biggest pool of natural gassupplies is again looking for new owners. Pan-Alberta Gas’president, Ross Weaver, confirmed, “we are still for sale.”

Nova Gas Transmission continues to handle about 80% (4.5 Tcf in1997, or 12.3 Bcf/d) of Canadian gas on its provincial gatheringgrid because Alberta remains both the biggest producer and centerof growth in output. But expectations of serious growth in BritishColumbia showed clearly when the National Energy Board visited theprovince’s resource development frontier of Fort St. John forregional hearings on the Alliance Pipeline Project.

The next challenge to the troubled Canadian natural gas pipelineestablishment opens May 25, when the National Energy Board hasscheduled the start for hearings on AEC Suffield Gas Pipeline.

Williams Field Services has snagged a big fish for its large newMobile Bay processing plant, signing up to process 300 MMcf/d ofgas for Exxon Company USA. The deal is the largest processingcontract to date for Williams. The NGL extraction plant to be builtnear Coden, AL is expected to be in service by the first quarter ofnext year and will have 600 MMcf/d of inlet capacity.

Add another pipeline project to the list of those that wouldmove gas eastward from the burgeoning Chicago market center. Crossroads Pipeline, in conjunction with CNG Transmission and EastOhio Gas, scheduled an open season for firm transportationbeginning Monday, March 2, and concluding April 20.