People who believe the end of the natural gas surplus also will be
the end of restructuring in the natural gas market are wrong,
according to a report by Richard Dixon, group vice president of
Panhandle Eastern Pipe Line Co. of Houston.
There will continue to be problems with excess capacity, Dixon
told an Oklahoma Senate committee. Consumption of natural gas in
the United States fell 9.8 percent from 18.3 trillion cubic feet in
1982 to 16.5 trillion cubic feet in 1986, he said.
Dixon's testimony was given Friday during the fourth meeting of
the senate select committee on natural gas trade practices, which
has solicited comments concerning the current situation in the
natural gas industry from natural gas producers, utilities and
Oklahoma is going to need financially-healthy pipelines to
transport natural gas produced within the state in order for that
fuel to compete against production from other areas of the country,
and with Canada, Dixon said.
"There's only so much baggage a pipeline can keep from the past
and continue to operate against pipelines with no baggage," he said.
In the past three to four years, the Federal Energy Regulatory
Commission has tried to reform and restructure the natural gas
The long run effects are hard to see, but Dixon said the short
term effects, at least while there is a natural gas surplus or
"bubble," are clear:
"Natural gas transported to the city gate, or to the end user,
will be at reduced prices."
Those prices are so low that they do not support exploration and
drilling for continued supplies of natural gas to those customers,
Natural gas reserves are being depleted, while the search for
new reserves has slacked off, he said.
The actions of FERC have been taken with little informed
consideration of their effects on the industry's ability to supply
today's consumer, Dixon said. Future consumers will see high-priced
natural gas supplies, he said.
Panhandle has two types of contracts, a sole-supplier contract
and a partial requirement contract, to supply natural gas to people
in Michigan, Indiana, Illinois and Missouri, Dixon explained.
The sole-supplier contract, making up 70 percent of Panhandle's
business, required customers to buy all the natural gas they needed
from Panhandle, he said.
Under the other contract, the customer received natural gas from
several pipelines, and was required to buy 75 percent of the
contracted volumes, or pay a minimum bill. …