Fuel-Switching Has Permanently Changed Natural Gas Industry / Says Arthur Andersen

Article excerpt

to alternate between fuels, typically natural gas and residual fuel oil - has permanently changed the natural gas industry, according to "Natural Gas Trends," an Arthur Andersen & Co. study released Monday.

U.S. industrial operations with an alternative fuel capacity are expected to use approximately 6 trillion cubic feet of natural gas in 1987, accounting for almost 40 percent of the country's total natural gas consumption, according to the study.

"At least one-third of the combined industrial and electric generation markets for natural gas - about 2 trillion cubic feet - can switch at virtually no cost and in a matter of hours or days to take advantage of cost savings as small as a few cents per million British thermal units," said Everett Gibbs, project director for Arthur Andersen.

The increased switchability translates into increased price sensitivity and seasonal volatility over the next several years, according to James Newcomb, coordinator for natural gas for Cambridge Energy Research Associates.

"Given the wide margin between current gas prices and the price `ceiling' set by the price of fuel oil, spot gas prices could rise by 30 percent before being constrained by competition from fuel oil," Newcomb said. …