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Strategies & Market Trends : IPPs and Merchant Energy Co.s -- Ignore unavailable to you. Want to Upgrade?

To: Broken_Clock who wrote (2048)	5/7/2003 12:05:44 AM
From: aniela	Respond to of 3358

Gas exports face backlash, energy regulator says Action suggested against price runups By PATRICK BRETHOUR Tuesday, May 6, 2003 - Page B1 Closing Markets Tuesday, May. 6 BANFF, ALTA. -- Canadians could turn against massive exports of natural gas to the United States if prices remain stubbornly high, the head of the national energy sector regulator says."The big runups we see from time to time I think could cause a public backlash," Ken Vollman, chairman of the National Energy Board, told the annual meeting yesterday of the Canadian Association of Members of Public Utility Tribunals. Mr. Vollman said he believes most Canadians favour free trade in energy in theory, but that support will evaporate if their heating bills linger at recent lofty levels. Government and the energy sector need to take action to forestall a consumer backlash, he said. Energy firms could increase reserves of natural gas to limit price spikes, he said, while government could make regulatory changes to allow consumers to lock in natural gas at a fixed cost, or offer rebates to low-income households. Natural gas costs soared this winter as unusually cold weather created a supply crunch, and prices are expected to remain high until major new sources of the commodity can be tapped.But Mr. Vollman and his counterparts in the United States and Mexico said yesterday that any boost to supplies is unlikely to arrive until the middle of the decade -- leaving North American businesses and consumers facing three years of big bills for natural gas.Beyond a consumer revolt, high natural gas prices could also damage North American competitiveness and spark a flight of cost-sensitive industries, such as the petrochemical sector, to regions where energy costs are lower, Mr. Vollman said. Concerns are being raised about the impact of rising natural gas costs on Alberta's energy intensive oil sands projects, said Neil McCrank, chairman of the Alberta Energy and Utilities Board. Natural gas, once considered the fuel that would be a bridge between dirtier fossil fuels and futuristic energy sources, is rapidly becoming a scarce commodity as demand soars -- particularly among power generators -- and conventional production in North America flattens out. New York natural gas closed yesterday at $5.689 (U.S.) per million British thermal units. But Mr. Vollman said the disappearance of "reserve margins" as natural gas markets were deregulated is another factor. The lack of a reserve means that prices immediately soar if a cold snap, or another unforeseen event, saps supplies. Mr. Vollman said he does not think reregulation is a solution, but that he will try to convince energy firms that building reserves to reduce volatility is in their own interests. However, building reserves will be difficult in the short term, since the sector is struggling to maintain production from conventional sources. Major new sources of supply are on the way, but Mr. Vollman said little relief can be expected before the middle of the decade. Liquid natural gas, shipped from Africa and Southeast Asia, will be one of the first sources of relief, according to the energy regulators. Already, Mexico has moved to accommodate LNG imports, giving regulatory approval last week for a terminal to be constructed on the Baja peninsula, said Dionisio Perez-Jacome, president of Mexico's Comision Reguladora de Energía. Another early source of natural gas could come from Alberta's coal beds, where methane is trapped. Finally, there is production from far-flung areas, such as the Arctic and the fields offshore of Nova Scotia. Each those resources will need to be tapped by the end of the decade to meet the voracious demand for natural gas in North America. "We need them all," said Patrick Wood, chairman of the U.S. Federal Energy Regulatory Commission.