By Mario Parker
March 23 (Bloomberg) -- Natural gas futures rose for a third day in New York on speculation a government plan to lift the economy will prove successful, boosting demand for the industrial and power-plant fuel.
Gas, oil and stock markets gained after the Obama administration said it would finance as much as $1 trillion in purchases of distressed assets. Gas futures are down 68 percent from their 2008 high in July as the recession cut demand from factories and electricity generators.
“There’s a bit of a plan coming together to hopefully stabilize these financial institutions,” said Tom Orr, research director at Weeden & Co. LP in Greenwich, Connecticut. “The banks are higher and I think gas can work its way higher.”
Natural gas for April delivery rose 6.7 cents, or 1.6 percent, to settle at $4.294 per million British thermal units at 2:51 p.m. on the New York Mercantile Exchange. The futures have declined 24 percent this year.
Crude oil for May delivery gained $1.73 or 3.3 percent, to settle at $53.80 a barrel on the exchange. The Standard& Poor’s index of 500 stocks increased 5.2 percent to 808.30 at 3:01 p.m.
Natural gas futures also advanced as a 17 percent rally since March 18 prompted some investors to close out short positions, or bets on falling prices, said Carl Neill, an energy analyst at Risk Management Inc. in Chicago.
Large speculators increased their net-short positions in gas futures by 1 percent to 115,187 contracts in the week ended March 17, Commodity Futures Trading Commission data show.
“The general thinking in this market was overwhelmingly how far it will go down and not if it will go down,” Neill said. “Last week’s reversal caught some people short. There were too many people leaning on the short side of the boat.”
U.S. Rigs
Falling prices in the past year prompted some gas producers to limit supply in an attempt to buoy prices. The number of gas rigs operating in the U.S. has dropped 47 percent to 857 from a peak of 1,606 in September, according to Baker Hughes Inc.
“Just as demand for unleaded fuel had dropped and refiners did a stealth cutback, nat gas producers did the same thing” to support prices, said Michael Rose, a director of trading at Angus Jackson Inc., a brokerage in Fort Lauderdale, Florida.
Prices will average $6.84 per million Btu in the fourth quarter, according to a Bloomberg survey of 20 analysts. Gas may rise further in 2010 to average $7.50 for the year.
Demand for the fuel has been stifled by factory shutdowns and slowdowns during the recession. Output at factories, mines and utilities in the U.S. dropped 1.4 percent in February after a revised 1.9 percent decline in January, the Federal Reserve said March 16.
Nucor Corp., the largest U.S. steelmaker, revised its first-quarter forecast from a profit to a loss because of lower- than-expected demand. Nucor’s steel mills will run at about 43 percent of capacity in the first quarter, down from 48 percent in the previous period, the company said March 16.
U.S. steel plants operated at 41 percent of capacity in the week ended March 14, down from with 90 percent in the same period a year earlier, the American Iron and Steel Institute said March 16.
To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net.
Tuesday, March 24, 2009
Investing Natural Gas Hedge Funds
March 23 (Bloomberg) -- Randy Shain said he wasn’t stunned when hedge-fund managers Paul Greenwood and Stephen Walsh were arrested last month for allegedly misappropriating $554 million in client funds.
A probe three years ago by his First Advantage Investigative Services LLC found in public documents that a brokerage run by the pair had agreed to settle regulators’ claims that it improperly used customer assets as loan collateral and had been fined at least 11 times for violating rules at several U.S. exchanges. The firm neither admitted nor denied the allegations, which covered actions from August 1985 to January 1986.
“It’s a case of turning over the stones and finding what’s underneath,” said Shain, who doesn’t know if the client of his New York-based firm steered clear of the fund managers.
Firms like Shain’s say they are seeing an increase in requests for background checks on fund managers in the wake of high-profile fraud cases against Bernard Madoff in New York, Florida’s Arthur Nadel and R. Allen Stanford and his Antigua- based bank. In all, the men are accused of cheating clients out of as much as $73 billion.
“Investors are being more careful in checking out where they put their money,” said Pete Turecek, a senior managing director overseeing hedge funds at Kroll Inc., a risk-consulting company in New York “As the economy continues to weaken, some people including money managers may be drawn to taking shortcuts.”
‘Really Fruitful’
Sharath Sury, whose S4 Capital LLC oversees $2 billion in assets, hired an investigative firm three years ago to look into a hedge fund before making a planned investment.
Sury said the probe revealed that the New York-based fund, which had $600 million in client assets, didn’t reconcile trades daily as the manager had claimed, reported inconsistent asset values and used an auditor related to its founder. The fund shut down in 2007, he said, declining to name the firm.
“This was a case of the background checks proving to be really fruitful,” said Sury, chief executive officer of Chicago-based S4 Capital. “It helped us avoid major losses.”
Investigators trawl through court filings and public databases such as LexisNexis and interview former employees to get information on managers that may raise concerns. They dig up records of violations of trading rules, faked resumes, drunk- driving offenses and drawn-out divorce cases.
$1,000 Cost
Background checks can take from two to six weeks, and may cost about $1,000 for each individual or company investigated, according to the firms.
“Basically you don’t want managers to have distractions that will impact their decision making,” said Michael Dubin, president of New York-based The LongChamp Group Inc., which allocates client money to hedge funds.
Background searches helped Cole Partners Asset Management LLC stay away from managers that were later found to have had run-ins with regulators, said Rian Akey, chief operating officer of the Chicago-based firm, which channels money into hedge funds.
Akey said a check done three years ago on a New York-based hedge fund found that in 1999 the managers had paid fines amounting to $500,000 for violating trading rules. “That was enough to put us off,” he said, declining to name the fund.
Public records show that Nadel, founder of Scoop Management Inc. in Sarasota, Florida, was disbarred as a lawyer in New York in March 1982. Nadel faces federal charges of defrauding investors of more than $300 million.
Undetected for Decades
Madoff fooled clients and regulators for decades as he used money from new investors to pay off old ones. Fairfield Greenwich Group, Tremont Group Holdings Inc. and Bank Medici AG were among victims that channeled client money to Madoff’s firm.
Harry Markopolos, a former money manager, told Congress that he had tried to convince the agency for nine years that Madoff was a fraud. Madoff, 70, pleaded guilty last week to defrauding investors of as much as $65 billion in the biggest Ponzi scheme in history. He will be sentenced on June 16 and faces 150 years in prison.
“There is now a rethinking of diligence practices,” said Mitch Nichter, a partner at Paul, Hastings, Janofsky & Walker LLP, a New York-based law firm. “This will translate into enhanced efforts to verify information provided by hedge funds.”
Not all investors hire outside firms to perform background checks. In-house teams can do the same work, says Cem Habib, portfolio manager at London-based Altedge Capital Ltd., which invests in hedge funds.
“In addition, we have an extensive network of people in the industry that we can speak with to check up on other people’s backgrounds if we need to,” he said.
Driving Records
Fraudulent activity is not the only thing that can be unearthed in investigations. Drunken driving can highlight character issues, according to Kroll’s Turecek.
“It may signify an inability to handle stress properly,” he said. “We look for patterns of behavior that may be indicative of a larger issue or of someone’s character.”
A background check on a New York-based hedge fund in 2005 found that one of its analysts had recently resisted arrest after being caught shoplifting, according to Jeff Brenner, a principal at Intelysis Corp. in Cherry Hill, New Jersey. The analyst was due to appear in court a week before the Intelysis client was about to put money in the fund, he said.
“At the end of the day he’s helping to determine where money is being invested,” said Brenner, whose firm has done more than 500 hedge-fund investigations since 1998.
Allegations in divorce filings, such as adultery with a co- worker, can also raise red flags, said Turecek.
“Such situations may warrant looking at the individual’s expenses to see if there were improperly charged to the company.”
To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net
A probe three years ago by his First Advantage Investigative Services LLC found in public documents that a brokerage run by the pair had agreed to settle regulators’ claims that it improperly used customer assets as loan collateral and had been fined at least 11 times for violating rules at several U.S. exchanges. The firm neither admitted nor denied the allegations, which covered actions from August 1985 to January 1986.
“It’s a case of turning over the stones and finding what’s underneath,” said Shain, who doesn’t know if the client of his New York-based firm steered clear of the fund managers.
Firms like Shain’s say they are seeing an increase in requests for background checks on fund managers in the wake of high-profile fraud cases against Bernard Madoff in New York, Florida’s Arthur Nadel and R. Allen Stanford and his Antigua- based bank. In all, the men are accused of cheating clients out of as much as $73 billion.
“Investors are being more careful in checking out where they put their money,” said Pete Turecek, a senior managing director overseeing hedge funds at Kroll Inc., a risk-consulting company in New York “As the economy continues to weaken, some people including money managers may be drawn to taking shortcuts.”
‘Really Fruitful’
Sharath Sury, whose S4 Capital LLC oversees $2 billion in assets, hired an investigative firm three years ago to look into a hedge fund before making a planned investment.
Sury said the probe revealed that the New York-based fund, which had $600 million in client assets, didn’t reconcile trades daily as the manager had claimed, reported inconsistent asset values and used an auditor related to its founder. The fund shut down in 2007, he said, declining to name the firm.
“This was a case of the background checks proving to be really fruitful,” said Sury, chief executive officer of Chicago-based S4 Capital. “It helped us avoid major losses.”
Investigators trawl through court filings and public databases such as LexisNexis and interview former employees to get information on managers that may raise concerns. They dig up records of violations of trading rules, faked resumes, drunk- driving offenses and drawn-out divorce cases.
$1,000 Cost
Background checks can take from two to six weeks, and may cost about $1,000 for each individual or company investigated, according to the firms.
“Basically you don’t want managers to have distractions that will impact their decision making,” said Michael Dubin, president of New York-based The LongChamp Group Inc., which allocates client money to hedge funds.
Background searches helped Cole Partners Asset Management LLC stay away from managers that were later found to have had run-ins with regulators, said Rian Akey, chief operating officer of the Chicago-based firm, which channels money into hedge funds.
Akey said a check done three years ago on a New York-based hedge fund found that in 1999 the managers had paid fines amounting to $500,000 for violating trading rules. “That was enough to put us off,” he said, declining to name the fund.
Public records show that Nadel, founder of Scoop Management Inc. in Sarasota, Florida, was disbarred as a lawyer in New York in March 1982. Nadel faces federal charges of defrauding investors of more than $300 million.
Undetected for Decades
Madoff fooled clients and regulators for decades as he used money from new investors to pay off old ones. Fairfield Greenwich Group, Tremont Group Holdings Inc. and Bank Medici AG were among victims that channeled client money to Madoff’s firm.
Harry Markopolos, a former money manager, told Congress that he had tried to convince the agency for nine years that Madoff was a fraud. Madoff, 70, pleaded guilty last week to defrauding investors of as much as $65 billion in the biggest Ponzi scheme in history. He will be sentenced on June 16 and faces 150 years in prison.
“There is now a rethinking of diligence practices,” said Mitch Nichter, a partner at Paul, Hastings, Janofsky & Walker LLP, a New York-based law firm. “This will translate into enhanced efforts to verify information provided by hedge funds.”
Not all investors hire outside firms to perform background checks. In-house teams can do the same work, says Cem Habib, portfolio manager at London-based Altedge Capital Ltd., which invests in hedge funds.
“In addition, we have an extensive network of people in the industry that we can speak with to check up on other people’s backgrounds if we need to,” he said.
Driving Records
Fraudulent activity is not the only thing that can be unearthed in investigations. Drunken driving can highlight character issues, according to Kroll’s Turecek.
“It may signify an inability to handle stress properly,” he said. “We look for patterns of behavior that may be indicative of a larger issue or of someone’s character.”
A background check on a New York-based hedge fund in 2005 found that one of its analysts had recently resisted arrest after being caught shoplifting, according to Jeff Brenner, a principal at Intelysis Corp. in Cherry Hill, New Jersey. The analyst was due to appear in court a week before the Intelysis client was about to put money in the fund, he said.
“At the end of the day he’s helping to determine where money is being invested,” said Brenner, whose firm has done more than 500 hedge-fund investigations since 1998.
Allegations in divorce filings, such as adultery with a co- worker, can also raise red flags, said Turecek.
“Such situations may warrant looking at the individual’s expenses to see if there were improperly charged to the company.”
To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net
Monday, March 23, 2009
Korea & Venezuela Sign Natural Gas Development Deal
THE WALL STREET JOURNAL ASIA
SEOUL -- South Korea signed a memorandum of understanding with Venezuela to jointly cooperate in exploring, developing, and producing oil and gas.
Venezuela's energy and oil minister, Rafael Ramirez, who is visiting South Korea, signed the agreement Saturday with South Korea's minister of knowledge economy, Lee Youn-ho.
Mr. Ramirez also runs Venezuelan state oil company Petroleos de Venezuela SA.
The two ministers also discussed strategic cooperation between PDVSA and South Korea's state-run Korea National Oil Corp. and Korea Gas Co.
Mr. Ramirez requested KNOC participate in development of an oil field that produces more than 200,000 barrels a day, located in Venezuela's Orinoco belt area. The Venezuelan minister also requested South Korea participate in the development of two gas fields.
Both sides agreed to come up with details of the preliminary pact in the near future.
SEOUL -- South Korea signed a memorandum of understanding with Venezuela to jointly cooperate in exploring, developing, and producing oil and gas.
Venezuela's energy and oil minister, Rafael Ramirez, who is visiting South Korea, signed the agreement Saturday with South Korea's minister of knowledge economy, Lee Youn-ho.
Mr. Ramirez also runs Venezuelan state oil company Petroleos de Venezuela SA.
The two ministers also discussed strategic cooperation between PDVSA and South Korea's state-run Korea National Oil Corp. and Korea Gas Co.
Mr. Ramirez requested KNOC participate in development of an oil field that produces more than 200,000 barrels a day, located in Venezuela's Orinoco belt area. The Venezuelan minister also requested South Korea participate in the development of two gas fields.
Both sides agreed to come up with details of the preliminary pact in the near future.
Sunday, March 22, 2009
Ukraine Gets Opportunity to Show Natural Gas Maturity
http://www.dw-world.de/dw/article/0,,4115007,00.html
The European Union and Ukraine are set to agree on a program of political reforms and physical repairs to the former Soviet state's gas network, officials said. But if Ukraine can't pay, Europe may not get any gas.
On Monday, March 23, Ukraine's President Viktor Yushchenko and Prime Minister Yulia Tymoshenko -- currently feuding ahead of presidential elections -- are set to meet the head of the EU's executive, Jose Manuel Barroso, and officials from the World Bank, European Investment Bank and energy companies in Brussels.
They are expected to sign a joint declaration committing Ukraine to reforming the rules for operating its gas network. That should pave the way for Western and Russian donors to invest in the renovation of the network, EU diplomats told DPA news agency.
Huge investments needed
One fifth of all the natural gas consumed in the EU flows through Ukraine's 13,500-kilometer (8,400-mile) network of gas pipelines. Some experts have said that the network will need some 2.5 billion euros ($3.4 billion) in investment over the next six years just to keep the pipes and pumping stations in working order.
Analysts say that Ukrainian monopoly Naftogaz, which runs the pipeline system, is having difficulties attracting the necessary investment due to a perceived lack of transparency both in its management and in Ukraine's top political leadership.
"I see a situation later this year where Naftogaz will not be able to meet its payment obligations to Gazprom because of its worsening financial situation," Robert Shetler-Jones from Swiss-based gas trader RosUkrEnergo (RUE) told Reuters news agency. RUE is owned by Russian gas giant Gazprom and two Ukrainian businessmen.
"If Ukraine continued not to pay, then this could have a serious impact on the European gas supplies," added Shetler-Jones.
A highly-charged issue
The question of Ukraine's gas transit system has been a highly-charged one ever since a row with Russia in 2005-2006 provoked Russian gas monopoly Gazprom to shut supplies off to Ukraine, causing severe shortfalls in Europe.
The drama was repeated in January, when gas supplies to the EU were stalled for two weeks.
The EU has said it is interested in becoming less dependent on both Russia and Ukraine as energy suppliers.
On Thursday, EU leaders agreed to give 200 million euros to the "Nabucco" pipeline project, which is meant to bypass both countries and bring gas directly from the Caspian Sea to Europe.
The European Union and Ukraine are set to agree on a program of political reforms and physical repairs to the former Soviet state's gas network, officials said. But if Ukraine can't pay, Europe may not get any gas.
On Monday, March 23, Ukraine's President Viktor Yushchenko and Prime Minister Yulia Tymoshenko -- currently feuding ahead of presidential elections -- are set to meet the head of the EU's executive, Jose Manuel Barroso, and officials from the World Bank, European Investment Bank and energy companies in Brussels.
They are expected to sign a joint declaration committing Ukraine to reforming the rules for operating its gas network. That should pave the way for Western and Russian donors to invest in the renovation of the network, EU diplomats told DPA news agency.
Huge investments needed
One fifth of all the natural gas consumed in the EU flows through Ukraine's 13,500-kilometer (8,400-mile) network of gas pipelines. Some experts have said that the network will need some 2.5 billion euros ($3.4 billion) in investment over the next six years just to keep the pipes and pumping stations in working order.
Analysts say that Ukrainian monopoly Naftogaz, which runs the pipeline system, is having difficulties attracting the necessary investment due to a perceived lack of transparency both in its management and in Ukraine's top political leadership.
"I see a situation later this year where Naftogaz will not be able to meet its payment obligations to Gazprom because of its worsening financial situation," Robert Shetler-Jones from Swiss-based gas trader RosUkrEnergo (RUE) told Reuters news agency. RUE is owned by Russian gas giant Gazprom and two Ukrainian businessmen.
"If Ukraine continued not to pay, then this could have a serious impact on the European gas supplies," added Shetler-Jones.
A highly-charged issue
The question of Ukraine's gas transit system has been a highly-charged one ever since a row with Russia in 2005-2006 provoked Russian gas monopoly Gazprom to shut supplies off to Ukraine, causing severe shortfalls in Europe.
The drama was repeated in January, when gas supplies to the EU were stalled for two weeks.
The EU has said it is interested in becoming less dependent on both Russia and Ukraine as energy suppliers.
On Thursday, EU leaders agreed to give 200 million euros to the "Nabucco" pipeline project, which is meant to bypass both countries and bring gas directly from the Caspian Sea to Europe.
Saturday, March 21, 2009
Natural Gas Supply Abundant - Maybe a Glut
By CLIFFORD KRAUSS
Published: March 20, 2009 - New York Times
HOUSTON — The decline in crude oil prices gets all the headlines, but the first globalized natural gas glut in history is driving an even more drastic collapse in the cost of gas that cooks food, heats homes and runs factories in the United States and many other countries. Six giant plants capable of cooling and liquefying gas for export are due to come on line this year just as the economies of the Asian and European countries that import the most gas to run their industries are slowing.
Energy experts and company executives say that means loads of gas from Qatar, Egypt, Nigeria and Algeria that otherwise would be going to Japan, Korea, Taiwan and Spain are beginning to arrive in supertankers in the United States, even though there is a gas glut here, too.
With industrial and utility use of natural gas declining, gas prices in the United States have already declined by two-thirds since the summer. Prices are not likely to go down much more, experts say, but an increase in imports is likely to keep them low until the global economy recovers and drives demand back up.
That is good news for American consumers and many businesses, since gas provides about a fifth of the power generated by electric utilities and is a vital component for fertilizers, plastics and other industrial products. But it is bad news for proponents of energy independence, who cheered the boom in domestic gas drilling and production over the last four years.
Gas industry executives expect that liquefied gas imports into the United States will at least triple in the second half of this year. That comes as domestic producers have lowered their rig count in natural gas fields around the country by 50 percent in the last several months because of the fall in prices, leading to an expected drop in production by the end of the year.
Normally a decline in production would result in a rising gas price, leading to an eventual recovery in drilling. But energy executives say that increasing imports will probably delay a recovery in production, which until now depended almost entirely on national market forces.
“The United States used to have gas bubbles all by itself; now the world can have a gas bubble,” said Donald Hertzmark, a consultant who advises energy companies on international gas projects. “Over the next few years, a globalized gas market will exert a moderating influence on gas prices here in the United States.”
For Mr. Hertzmark the decline in natural gas prices will mean a major stimulus for the domestic and world economies. American oil executives see it another way.
Rodney Waller, a senior vice president at the oil and gas company Range Resources, called the expected surge in liquefied natural gas imports part of a “pile on” of problems including plummeting demand, prices and credit besetting companies that stretched their exploration and production budgets in recent years to meet expanding demand.
“Any time you push the price down, you push down the ability of U.S. independents to add reserves and production domestically,” he said. He warned that some small and midsize oil and gas companies “with debt that are in trouble now will simply get pushed over the brink.”
Natural gas is becoming a world commodity like oil. It is still loosely connected to world oil benchmark prices and its price, usually set by longer-term contracts everywhere except for the United States and Britain, can diverge widely from one continent to another. Until the last few years, liquefied natural gas was a high-priced necessity for countries that did not produce their own gas supplies or have access to piped reserves; but it now has become a cheap economic driver for countries like Japan with few energy resources.
But as more terminals have been built, the amount of gas that is shipped from one continent to another in giant tankers has climbed. And now the emergence of the global market in gas is about to take a giant leap.
The global capacity for liquefied natural gas exports of 200 million tons a year will increase by 25 percent with the completion of six new plants in Qatar, Russia, Indonesia and Yemen, totaling $48 billion in investments, and the upgrading of a seventh plant in Malaysia. National energy companies in those countries, assisted by ExxonMobil, Total, BP and Shell, rushed construction of those projects in recent years to satisfy the mushrooming appetite for energy around the world. More large plants are due on line in 2010 and 2011.
“We had many years of ever increasing demand so the world geared up for that, but what the world did not prepare for was an economic recession that is global in scope and in impact,” said Darcel L. Hulse, president and chief executive officer of Sempra LNG, a division of Sempra Energy that operates an import terminal in Mexico and is completing construction on a facility in Louisiana. “That is what has exacerbated the imbalance of supply and demand to such an excess.”
Some analysts say companies may slow completion of a few of the new export terminal projects. “The companies will want to bring them on line because they want to recoup their investments made over four to five years and pay off their loans,” said Nikos Tsafos, an analyst at PFC Energy, a firm that advises governments and energy companies.
The international gas glut and expected surge in gas imports represent a reversal from trends of less than a year ago when the world suffered a shortage of liquefied gas and prices spiked in the United States and elsewhere.
Natural gas in the United States costs a little over $4 per thousand cubic feet, down from a peak of more than $13 last year. Oil now costs a bit more than $51 a barrel, down from a peak of more than $145 in July. On average, world spot prices for liquefied natural gas cargoes have come down by more than two-thirds since last summer.
Published: March 20, 2009 - New York Times
HOUSTON — The decline in crude oil prices gets all the headlines, but the first globalized natural gas glut in history is driving an even more drastic collapse in the cost of gas that cooks food, heats homes and runs factories in the United States and many other countries. Six giant plants capable of cooling and liquefying gas for export are due to come on line this year just as the economies of the Asian and European countries that import the most gas to run their industries are slowing.
Energy experts and company executives say that means loads of gas from Qatar, Egypt, Nigeria and Algeria that otherwise would be going to Japan, Korea, Taiwan and Spain are beginning to arrive in supertankers in the United States, even though there is a gas glut here, too.
With industrial and utility use of natural gas declining, gas prices in the United States have already declined by two-thirds since the summer. Prices are not likely to go down much more, experts say, but an increase in imports is likely to keep them low until the global economy recovers and drives demand back up.
That is good news for American consumers and many businesses, since gas provides about a fifth of the power generated by electric utilities and is a vital component for fertilizers, plastics and other industrial products. But it is bad news for proponents of energy independence, who cheered the boom in domestic gas drilling and production over the last four years.
Gas industry executives expect that liquefied gas imports into the United States will at least triple in the second half of this year. That comes as domestic producers have lowered their rig count in natural gas fields around the country by 50 percent in the last several months because of the fall in prices, leading to an expected drop in production by the end of the year.
Normally a decline in production would result in a rising gas price, leading to an eventual recovery in drilling. But energy executives say that increasing imports will probably delay a recovery in production, which until now depended almost entirely on national market forces.
“The United States used to have gas bubbles all by itself; now the world can have a gas bubble,” said Donald Hertzmark, a consultant who advises energy companies on international gas projects. “Over the next few years, a globalized gas market will exert a moderating influence on gas prices here in the United States.”
For Mr. Hertzmark the decline in natural gas prices will mean a major stimulus for the domestic and world economies. American oil executives see it another way.
Rodney Waller, a senior vice president at the oil and gas company Range Resources, called the expected surge in liquefied natural gas imports part of a “pile on” of problems including plummeting demand, prices and credit besetting companies that stretched their exploration and production budgets in recent years to meet expanding demand.
“Any time you push the price down, you push down the ability of U.S. independents to add reserves and production domestically,” he said. He warned that some small and midsize oil and gas companies “with debt that are in trouble now will simply get pushed over the brink.”
Natural gas is becoming a world commodity like oil. It is still loosely connected to world oil benchmark prices and its price, usually set by longer-term contracts everywhere except for the United States and Britain, can diverge widely from one continent to another. Until the last few years, liquefied natural gas was a high-priced necessity for countries that did not produce their own gas supplies or have access to piped reserves; but it now has become a cheap economic driver for countries like Japan with few energy resources.
But as more terminals have been built, the amount of gas that is shipped from one continent to another in giant tankers has climbed. And now the emergence of the global market in gas is about to take a giant leap.
The global capacity for liquefied natural gas exports of 200 million tons a year will increase by 25 percent with the completion of six new plants in Qatar, Russia, Indonesia and Yemen, totaling $48 billion in investments, and the upgrading of a seventh plant in Malaysia. National energy companies in those countries, assisted by ExxonMobil, Total, BP and Shell, rushed construction of those projects in recent years to satisfy the mushrooming appetite for energy around the world. More large plants are due on line in 2010 and 2011.
“We had many years of ever increasing demand so the world geared up for that, but what the world did not prepare for was an economic recession that is global in scope and in impact,” said Darcel L. Hulse, president and chief executive officer of Sempra LNG, a division of Sempra Energy that operates an import terminal in Mexico and is completing construction on a facility in Louisiana. “That is what has exacerbated the imbalance of supply and demand to such an excess.”
Some analysts say companies may slow completion of a few of the new export terminal projects. “The companies will want to bring them on line because they want to recoup their investments made over four to five years and pay off their loans,” said Nikos Tsafos, an analyst at PFC Energy, a firm that advises governments and energy companies.
The international gas glut and expected surge in gas imports represent a reversal from trends of less than a year ago when the world suffered a shortage of liquefied gas and prices spiked in the United States and elsewhere.
Natural gas in the United States costs a little over $4 per thousand cubic feet, down from a peak of more than $13 last year. Oil now costs a bit more than $51 a barrel, down from a peak of more than $145 in July. On average, world spot prices for liquefied natural gas cargoes have come down by more than two-thirds since last summer.
Friday, March 20, 2009
Colorado Consumer Natural Gas Down 31%
DENVER - Colorado's largest utility says the price it charges for natural gas will fall by 31 percent next month compared to the current month.
Xcel Energy Inc. said Wednesday it submitted the proposed rate cut to state regulators at the Colorado Public Utilities Commission.
Xcel says the lower gas price combined with warmer weather could bring a 41 to 45 percent decline in residential and small-business gas bills in April compared with March.
The company said gas prices are falling because the recession has reduced demand and because so much gas is now in storage waiting to be used.
Xcel is based in Minneapolis.
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Xcel Energy Inc. said Wednesday it submitted the proposed rate cut to state regulators at the Colorado Public Utilities Commission.
Xcel says the lower gas price combined with warmer weather could bring a 41 to 45 percent decline in residential and small-business gas bills in April compared with March.
The company said gas prices are falling because the recession has reduced demand and because so much gas is now in storage waiting to be used.
Xcel is based in Minneapolis.
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Thursday, March 19, 2009
Natural Gas Customers in Missouri Looking for 25% Rate Cut
The sluggish economy has produced at least one ray of good news for natural gas customers. AmerenUE yesterday filed a request with the Missouri Public Service Commission for a 25 percent rate reduction for residential natural gas service.
Susan Gallagher, AmerenUE spokeswoman, said lower demand nationwide for natural gas is one reason for the second rate reduction in five months for the company’s 127,000 natural gas customers. Electric rates will not be affected.
“When you see a recession like this and demand back off, the pricing also drops in response to that,” Gallagher said.
Kevin Kelly, PSC public information administrator, said commission staff will review the rate-change request, which likely will be on the commission’s March 25 agenda.
AmerenUE has requested that the new rate take effect April 1. This would be Ameren’s second rate reduction since October, reflecting lower wholesale costs from the company’s suppliers.
The new “purchased gas adjustment,” or PGA, rate would decrease from approximately 99 cents per hundred cubic feet of natural gas to 75 cents per hundred cubic feet. Gallagher said customers in the company’s service areas will experience varying savings because of usage differences. For Central Missouri customers, the change in the PGA will result in an average decrease in a customer’s total bill, excluding taxes, of about $6.29 per month during the “non-winter” usage period of April through October.
The rate was reduced from $1.10 per hundred cubic feet to 99 cents last fall. The rate was reduced despite higher wholesale supplier rates, which have decreased in the past four to six weeks, Gallagher said.
The new rate would be in effect until at least June, Gallagher said. Any changes after that would be a direct reflection of wholesale costs.
Thomas Moss, AmerenUE president and CEO, said in a news release that the company’s long-term contracts for wholesale natural gas and the use of storage are factors in controlling market volatility.
The PGA reflects the wholesale cost of natural gas from the company’s suppliers, plus the cost of transporting that gas to the AmerenUE system. Since the wholesale costs change daily, the PGA also includes an adjustment to compensate for any under- or over-collection of actual costs in previous periods. AmerenUE passes these supplier costs on to customers, dollar for dollar, through the PGA.
For residential customers, the PGA accounts for about two-thirds of an average gas bill, excluding taxes, so any change in the PGA can have a significant impact on the total price customers pay.
Kelly said PSC staff will review AmerenUE’s rate request to ensure the accuracy of costs and compliance with current regulations as well as whether the request reflects current market conditions.
Reach Jodie Jackson Jr. at 573-815-1713 or e-mail jjackson@columbiatribune.com.
Susan Gallagher, AmerenUE spokeswoman, said lower demand nationwide for natural gas is one reason for the second rate reduction in five months for the company’s 127,000 natural gas customers. Electric rates will not be affected.
“When you see a recession like this and demand back off, the pricing also drops in response to that,” Gallagher said.
Kevin Kelly, PSC public information administrator, said commission staff will review the rate-change request, which likely will be on the commission’s March 25 agenda.
AmerenUE has requested that the new rate take effect April 1. This would be Ameren’s second rate reduction since October, reflecting lower wholesale costs from the company’s suppliers.
The new “purchased gas adjustment,” or PGA, rate would decrease from approximately 99 cents per hundred cubic feet of natural gas to 75 cents per hundred cubic feet. Gallagher said customers in the company’s service areas will experience varying savings because of usage differences. For Central Missouri customers, the change in the PGA will result in an average decrease in a customer’s total bill, excluding taxes, of about $6.29 per month during the “non-winter” usage period of April through October.
The rate was reduced from $1.10 per hundred cubic feet to 99 cents last fall. The rate was reduced despite higher wholesale supplier rates, which have decreased in the past four to six weeks, Gallagher said.
The new rate would be in effect until at least June, Gallagher said. Any changes after that would be a direct reflection of wholesale costs.
Thomas Moss, AmerenUE president and CEO, said in a news release that the company’s long-term contracts for wholesale natural gas and the use of storage are factors in controlling market volatility.
The PGA reflects the wholesale cost of natural gas from the company’s suppliers, plus the cost of transporting that gas to the AmerenUE system. Since the wholesale costs change daily, the PGA also includes an adjustment to compensate for any under- or over-collection of actual costs in previous periods. AmerenUE passes these supplier costs on to customers, dollar for dollar, through the PGA.
For residential customers, the PGA accounts for about two-thirds of an average gas bill, excluding taxes, so any change in the PGA can have a significant impact on the total price customers pay.
Kelly said PSC staff will review AmerenUE’s rate request to ensure the accuracy of costs and compliance with current regulations as well as whether the request reflects current market conditions.
Reach Jodie Jackson Jr. at 573-815-1713 or e-mail jjackson@columbiatribune.com.
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