Las Vegas (Platts)--8Dec2000

Consultant Allan Stewart predicted Friday there is a one-in-two or one-in-three chance that the gas industry in the West will physically run out of gas this winter. In the East, he said, the probability is at one-in-five. "This is a very, very tough situation we're in," he warned attendees at a Power Markets Week conference in Las Vegas. Stewart, managing director of Pira Energy Group, said the basic problem is that even though prices are rising, gas demand isn't being diminished. Going into December, Pira believed that 3 Bcf/d of demand needed to be "destroyed" to counter this year's relatively low storage stocks. That hasn't happened; rather than knocking off supply, the gas industry is filling it by pulling from storage. It now appears that the storage gap will widen from 100 Bcf at the end of November to 200 Bcf at the end of December. And because of quirks in American Gas Assn. counting techniques, storage in the West is really 60 Bcf below the stated levels, Stewart asserted. "I'm frightened," he declared. With an anticipated storm due to hit the West early next week, "it really looks pretty ugly," he said, adding that "I've never seen a more dysfunctional market." What could improve the outlook? Water conditions for hydroelectric generation in California and the Northwest are below normal, and some wet weather would help, Stewart said. A more fundamental solution would be a hard landing for the US economy, and Pira puts the odds for that at one in two. At that point the gas supply problems would disappear because there would be "a helluva recession" in California, Stewart said.

http://www.platts.com/stories/gas2.html

-- Martin Thompson (mthom1927@aol.com), December 08, 2000