Money problems _ cash flow, working capital, credit, equity _
have plagued the oil and gas industry for nearly a decade.
It's somewhat ironic, however, that as the natural gas
industry appears poised to assume a larger portion of the U.S.
energy mix, the credit crunch, particularly, seems to be at the
apex in the gas industry.
Especially hard hit are the gas marketers, and some of the
large pipelines that failed to rein in those hairy take-or-pay
contracts. Both may be to the delight of gas producers, many of
which detest marketers _ the middlemen in sales transactions _
and pipelines that have held a tight grip on the gas industry
from all angles historically.
But there's a domino effect when a marketer goes bankrupt, as
in most default cases. When the middleman goes, the buyer doesn't
have gas and the seller _ or producer _ then has to find another
buyer or arrange a direct deal. In some cases, though, the
marketing firm was put in jeopardy by unsteady credit of its
The sometimes praised, sometimes cursed Federal Energy
Regulatory Commission Order 636 would seem to ease the dilemma
because it is designed to make direct sales easier by forcing
interstate pipelines into a common carrier role. The problem,
though, is that marketers often contract with numerous producers
in order to get the volumes required by most buyers _ usually big
utilities or large industries.
Thus, what are producers to do? Buyers can pick another
marketer from the pack that's still in business, in many cases.
Producers are allowed to form cooperatives to pool their gas
volumes under Order 636, but most believe that's impractical.
Some of the more prominent bankruptcies in the gas industry
are: GasMark, Centran, Endevco, TransMarketing, Manufacturers
Fuel, Columbia Gas Transmission, Columbia Gas Systems and United
Gas Pipeline. That doesn't count the who-knows-how-many producers
that have bit the dust since the mid-1980s.
For some, the answer has been to merge with a larger partner.
For example, EnTrade Corp. and Tenneco Gas Marketing, which is
ranked about eighth among marketers, recently closed a merger
deal. It's said the successor firm will handle 5 percent of the
nation's gas consumption.
But, Oklahoma City's own Clinton Gas Systems and its
affiliate, Clinton Gas Trading, reportedly are among the first in
the industry to strengthen internal credit verification as a
defense to the existing credit crunch.
Clinton Gas President Dan Ryan will explain his defense
strategy at a seminar focusing on the credit crunch later this