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6.10.03 U.S. has few options for boosting gas supply The Bush Administration will focus on conservation efforts, improved energy efficiency, and fuel switching to ease the looming natural gas supply crunch -- because it has few other options, Secretary of Energy Spencer Abraham said in a letter sent to Senate Minority Leader Tom Daschle last Friday. "Over the next 12 to 18 months there are only limited opportunities to increase supply," Abraham wrote in the letter. "Therefore, the emphasis must be on conservation, energy efficiency, and fuel switching." Abraham insisted late last month that increased drilling for new natural gas would not provide enough new gas to meet the heating needs for the coming winter. Concern over the state of US natural gas supplies prompted Abraham to call for a meeting of the National Petroleum Council, an advisory panel consisting of academics and members of the industry, to look at short-term actions that could address the problem. The meeting will be held Jun. 26 in Washington, DC, the Department of Energy said Monday. The concern has been heightened by remarks made by Federal Reserve Chairman Alan Greenspan in testimony before Congress last month, when he called the supply crunch a "very serious problem." (OD May 22, p 2). Greenspan will be testifying on the subject before the energy and air quality subcommittee of the House Energy and Commerce Committee today. While coal provides some 52% of US electric generation, natural gas has become the fuel of choice for new power plants, especially for peaking units that provide power during times of high demand such as hot summer days. But natural gas markets need to be refilling storage stocks, which were heavily drawn down this past winter, for the 2003-04 winter heating needs. Even with last week's record 114 billion cubic feet (Bcf) injection, natural gas storage levels are only at 1,199 Bcf, 755 Bcf below last year at this time, and 484 Bcf off of the five-year average level of 1,683 Bcf. The generally agreed upon comfort zone for gas storage for the winter is 3 trillion cubic feet. Industry analysts speculate that to foster fuel switching by electric power plants away from natural gas, the administration may step in and declare a supply emergency in natural gas or, possibly, lift clean air restrictions, allowing power generators to use petroleum products rather than natural gas. According to Schwab Capital Market analyst Christine Tezak, the Natural Gas Policy Act allows the president to declare a supply emergency and for the Department of Energy (DOE) to authorize gas purchases and to allocate supplies in interstate commerce. Further, the Public Utilities Regulatory Policies Act allows DOE to keep power plants and other major fuel-burning facilities from using gas. If the government does take such a drastic step, the result will likely have little impact on the electricity prices. With near month natural gas futures on the New York Mercantile Exchange at $6.51 per million British thermal unit -- the equivalent of $32.55/bbl of crude -- switching to distillates would not be competitive for a power plant. In the northeastern US, power plants would likely switch to either No. 2 low-sulfur heating oil, which is selling at a New York Harbor price of roughly $33.11/bbl, or jet fuel at a New York Harbor price of $33.05/bbl. |
We have gas in storage to use for the coming winter. |
