Top officials at several U.S. retail gas companies reveal how they are rethinking their business models and developing new approaches to serve customers in the face of supply concerns and price...
Gas Executives Forum: The New Downstream Dynamic
Gas distributors tell how their business strategies are changing in response to issues such as higher gas prices, electric M&A, LNG, and gas pipeline development.
it's harder for consumers to pay their gas bill.
Jesanis, National Grid: The supply problem is related to the intersection between the gas and electricity sectors. Gas has become not just the fuel of choice, but virtually the only choice for new power plants in this part of the country. In other regions there might be greater ability to introduce more coal into the mix, or build truly dual-fuel power plants. But in this part of the country, I don't think it's possible to license a coal or nuclear plant. That means the alternatives to natural gas are things like windpower, which don't fit neatly into the grid's needs. I think gas will continue to be the fuel of choice for power generation for some time to come.
Downes, New Jersey Resources: We need renewables in the package because so much of the increased demand is expected to be for power generation. Renewables may have limitations, but that just means we need to get cracking on it right now.
Fortnightly Since the summer of 2003, much attention has been paid to expanding U.S. LNG capacity. Does progress on LNG terminals give gas retailers confidence that LNG supplies will be available when needed?
Fowler, Duke Energy: We think LNG's day has arrived, and the more we can accelerate LNG projects, the better. The two key challenges are siting import facilities and getting people aligned on supply arrangements. Projects in the Gulf Coast and on Canada's east coast are progressing nicely in terms of approvals.
Felsinger, Sempra Energy: Most people who study the problem are convinced that LNG is the long-term solution that can put prices back in a range where they will have the least impact on customers, both residential and commercial. It is hard to tell where the market is going, but looking to 2006 and 2007, NYMEX futures prices are still in the high $6 range. They don't start falling until 2008, and in my mind that coincides with the time when currently contracted LNG terminals will begin operating.
The market is telling us that we are operating at the edge of a supply/demand imbalance, and it won't take much to fall off that edge and have prices spike to $7, $8, or $9.
My view is that between now and the end of the decade we'll have between seven and 10 new LNG facilities built. That will handle demand growth, and we'd expect to see gas prices being set by LNG.
Am I satisfied with the pace of LNG development? No, I'm not, but I don't know what we can do to speed it up. The solutions are still three years out, and in the meantime we have to live with that and manage prices as best we can.
Downes, New Jersey Resources: We are not going back to the days of low prices, and without policy changes we will continue facing supply-demand imbalances.
Under any scenario, LNG will play a larger role in the country's supply picture. There's no question about that. The issues now are more related to