'End of era of cheap natural gas'greenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
Page URL: http://www.nationalpost.com/financialpost/cadbusiness/story.html?f=/stories/20010427/545084.html
April 27, 2001
'End of era of cheap natural gas' BC Gas Inc.: 'There is a lot of nervousness about power supply'
Drew Hasselback Financial Post
VANCOUVER - Rising natural gas kept first-quarter profit flat at BC Gas Inc., and the company's president and chief executive does not expect prices to fall any time soon.
"The price of gas was always so low and so predictable that people hardly considered it," John Reid told shareholders at the company's annual meeting yesterday.
"That changed in a significant way this past winter when we witnessed, I believe, the end of an era of cheap natural gas."
BC Gas reported March 31 first-quarter profit of $61-million ($1.59 a share) on revenue of $551.4-million. A year earlier, profit was $61.3-million ($1.60) on revenue of $344.7-million.
BC Gas operates a pipeline network that distributes natural gas bought from producers. Its higher revenue reflects gas price increases that were passed on to consumers without any markup.
Mr. Reid said natural gas prices are now inextricably linked to electricity prices and demand, particularly as California continues to struggle with power shortages.
He said the pricing problem will be exacerbated by a dry winter on the West Coast, which has reduced water levels at hydro dams. That means power producers will need more natural gas to fuel generators, and that will keep demand and prices high.
"There is a lot of nervousness out there about power supply," he said.
BC Gas is still polling gas producers to determine whether there is enough demand for a new, 260-kilometre long natural gas pipeline from northern B.C. to Sumas, Wash., on the Canada-U.S. border.
The proposed Inland Pacific Connector line, which is subject to regulatory approval, would cost $460-million and enter operations in 2003.
Mr. Reid said the new pipeline is absolutely needed for supply in the Pacific Northwest to catch up with demand.
"We need more pipe into the Lower Mainland. We've got to get more gas into the Sumas hub."
Mr. Reid said BC Gas limits its exposure to higher prices through hedging, storage and transportation programs. He said such programs saved $500-million in costs over the past year, and customers' bills would be twice as high had the programs not been in place.
-- Martin Thompson (firstname.lastname@example.org), April 27, 2001