Canada: Gas pain in the pipe Analyst predicts $8-per-gigajoule natural gas next winter - hiking heating tabs by $500

By TIMOTHY LE RICHE

Edmonton Sun

Natural gas prices could skyrocket to as high as US$8 from the current Alberta spot rate of about US$4.50 per gigajoule, a Calgary analyst warns, hiking bills by up to US$500 for the year.

Peter Linder of Harris Partners Ltd. said this week that the future of the Canadian oil and gas market has never looked so bright. But consumers will be paying for it.

Linder suggested the spot price could reach US$5 this summer. And, depending on how cold and harsh next winter plays out, prices could push to US$8.

Albertans burn an average 150 gigajoules a year, with two- thirds sucked up in winter. At an US$8 winter rate, that's about US$800 for just the gas, not including distribution fees.

Last winter's rates were about US$3 per gigajoule, making a difference of about US$500 if the average price is US$8.

"We are in a situation today that we've never seen in the industry," Linder said in Edmonton. "We're going to see prices like we've never seen."

Alberta's natural gas supply is facing increased demand from the United States and more supply is flowing south of the border as pipeline capacity increases.

"To increase production, we have to get further into areas like the Northwest Territories," said Linder.

"Development of the McKenzie Delta is very much needed."

Linder also admitted that gas prices could dip back to as low as US$3 per gigajoule, again depending on what kind of winter Albertans face.

Chris Sheard, president of ATCO Gas, which makes money on distribution of natural gas but doesn't profit on the gas itself, said there's no signal in markets that prices will climb as high as US$8 per gigajoule.

"It is not our business to be forecasting future prices," said Sheard. "We buy our gas on the open market, and that open market does signal some forward pricing.

"If you were to go on the market today to buy gas for the upcoming winter, you'd be paying about US$5.10. Who knows ... whether that will be the prevailing price?"

But prices higher than current rates are certainly in the wind, he said.

Consumer prices through ATCO Gas went up May 1 by about US$4 per month for the average user.

ATCO's summer rate was hiked to US$3.339 per gigajoule, up from US$2.71 applied April 1.

Greg Stringham, vice-president of markets and fiscal policy for the Canadian Association of Petroleum Producers, confirmed that natural gas prices depend on weather, related to air-conditioning demand during the U.S. summer and heat demand during the Alberta winter.

"Prices are very volatile right now," said Stringham. "Natural gas is the fuel of choice right now."

However, he said that Albertans can always expect to pay among the cheapest prices in the North America because we sit on top of the resource and transport costs are low.

http://www.canoe.ca/MoneyNews/may20_gasprices.html

-- Carl Jenkins (Somewherepress@aol.com), May 20, 2000