New Markets, Pipelines Crucial to Natural Gas Industry

Article excerpt

It is widely agreed that one of the most important events that would serve to boost natural gas prices is better marketing. Sure, Mother Nature could help by chilling out a bit more, or at least more normally, this winter. But still the market for gas must be broadened.

There are two types of new markets.

First, there are new geographic markets, like New England or the West Coast or Atlantic seaboard.

Second, there are new types of markets, like air conditioning or natural gas vehicles.

There has been much fanfare about natural gas vehicles, particularly in Oklahoma, so I will not belabor the point further.

On the former angle, though, there is an interesting debate about increasing delivery of Oklahoma natural gas to new areas.

There are several new pipeline connections in Oklahoma _ the huge Arkla line, Natural Gas Pipeline's link of its west and east lines across the state and Transok's new intrastate line. Others are planned, and most concentrate on the Arkoma Basin or linking it with the Anadarko Basin.

When all the new pipelines are complete, there will be room for another 3 billion cubic feet of natural gas per day and then some. All at a cost of some $3 billion or more.

There are two factors that hinge upon the success of these pipelines in improving conditions for producers.

One, there has to be upstream connections to new markets.

Two, there is the impact of intrastate connections, which has emerged due to the federal policy of open access to interstate pipelines.

"Gas is now being moved between pipelines," explained Doug Burton, chairman of The Acarus Group in Oklahoma City, in a recent interview. "In the old days, and the old days is back in the '70s, those pipelines aggregated their own supplies, and they tried to be self-sufficient. That much gas didn't slosh around from pipeline to pipeline.

"But with the creation of this large, interruptible market and open access, there have been a lot of interconnections made between trunk lines, interstate as well as intrastate pipelines.

"So, gas sloshes around a lot more. Evidence of that is how San Juan Basin (New Mexico) gas is moving clear across Texas on back hauls, combination back hauls and forward hauls and, it's going all the way up to the East Coast.

"We saw the demarcation line for gas going to the West Coast and East Coast about coming right down through Oklahoma City, maybe, in the past.

Now it has shifted about 700 miles to the west." That means Oklahoma natural gas used to go westward if produced west of Oklahoma City or eastward if produced east of Oklahoma City. Now all Oklahoma gas is directly competing with gas elsewhere for all markets.

Particular attention has been given to New Mexico gas because it is highly credited with tax breaks that cause discounted prices. Estimates show a 90-cent advantage for New Mexico gas, which is produced from coalseam methane caverns.

For those interested in taking advantage of intrastate pipelines to reach new markets, Gas Daily and Gas Buyer's Guide are holding a conference specifically aimed at producers and marketers in Oklahoma, Texas and Louisiana on Oct.

2-3. The conference, which features Gov. Henry Bellmon's former energy aide William C. Liedtke III and Ward Petroleum President Lew Ward, will be in Houston. …