EDITOR'S NOTE: This is the fifth of a seven-part series on the
anticipated impact on the domestic oil and gas industry of new
federal rules in the natural gas industry. It is viewed in
conjunction with the impact of major oil companies' shift in
drilling emphasis to the international arena, away from domestic
By Ronda Fears
Journal Record Staff Reporter
Evolution of a deregulated domestic natural gas industry may
offer broad opportunities for further integration in that energy
segment, particularly if demand grows as expected.
Common carrier status for gas pipelines will be implemented
throughout 1993 pursuant to Federal Energy Regulatory Commission
Order 636, which disconnects merchant sales and transportation
functions among interstate pipelines.
The transition aims to bring buyers and sellers closer in the
marketplace and foster increased competition, a process begun in
the mid-1980s when FERC issued a rule to open access to
Aggregation of gas supplies replaces marketing as the new
industry buzzword and storage takes on a more dominant role.
Third-party marketers, which arrange supply and transportation
for buyers, surfaced in 1985 when the spot gas market and open
"A trend that should take shape is the U.S. gas transmission
grid should become much more integrated and much more efficient,"
said Doug Burton, chairman of The Acarus Group in Oklahoma City,
at a local seminar on Order 636.
"There should be an increased focus on long-term contracts. I
believe that trend is under way."
A panel of producers and gas experts at the midyear Oklahoma
Independent Petroleum Association meeting a few months ago were
not optimistic that it will bring back long-term contracts even
at a shorter time frame of three years vs. contracts of 10 to 20
In years past, pipelines bought gas from producers and
delivered it to their customers _ mostly big gas utilities. With
open access, the pipelines' role as supply assembler diminished.
With Order 636, it almost evaporates, but pipelines can still own
Since the mid-1980s, gas marketers _ many of which are
branches of the major producers, large independents or interstate
pipelines _ also began selling gas directly to end users like
industrial plants, bypassing the local utility.
"The key feature of Order 636 is FERC has taken this prior
bundled package of commodity purchases of gas, transportation of
gas, storage of gas and, along with management of the system,
separated it out into individually available components," John
Herbert, vice president of the Houston marketing firm Natural Gas
Clearinghouse, said in Oklahoma City recently.
Pipelines are still anticipated to be among the largest
aggregators of gas supplies, but major producers have edged in
since 1985. Majors were five of the top 10 U.S. gas marketers,
which sell about half the gas consumed nationwide.
"The majors are looking at this thing in a broader context,"
said Barney Groten, vice president of Energy International Inc.
in Bellevue, Wash., and former director of Sarkeys Energy Center
at the University of Oklahoma in Norman.
"These people (the majors) tend to think long term, and in an
integrated business kind of thinking, as opposed to the classic
oil and gas field driller."
It is commonly known that the majors dominate the integrated
oil industry _ owning vast reserves and production, oil
pipelines, storage facilities and most of the U. …