ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, May 1, 1996 TAG: 9605010033
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
DATELINE: IRVING, TEXAS
SOURCE: Associated Press
A cold winter and low supply of stored natural gas may combine to heat up prices, possibly bringing good news to an industry hampered by lukewarm rates.
Storage levels of natural gas are at their lowest since the American Gas Association began tracking statistics three years ago, with 66 percent capacity at the beginning of the year, dropping to only 18 percent as of April 19.
That may be good news for the natural gas industry, where pricing can be influenced by available supply. But it could mean higher prices for consumers.
``It helped a lot that the winter was so bad and storage was depleted,'' said Diane Kaufman with Dallas-based Enserch Corp., an integrated natural gas company.
This winter, the coldest in a decade, pushed natural gas prices to $2.10 per thousand cubic feet, up from $1.65 a year earlier. On Monday, prices for natural gas to be delivered in June were at $2.223.
John Williamson III, vice president for rates and finance at Roanoke Gas Co., said the wholesale price of gas had climbed "rather dramatically" over the winter but now is starting to back off a bit.
The Roanoke natural gas utility has adjusted its consumer rates through fuel-clause adjustments filed with the State Corporation Commission that allow the company to compensate for the price increases, he said.
Williamson said he expects rates will run a little higher through this summer than they did last summer because the price of gas being put in storage reserves will be higher than it was a year ago.
Natural gas is used year-round, but primarily in heating, so gas producers count on winter for their biggest sales. But to have an adequate supply during peak demand periods, natural gas is pumped year-round and held in storage facilities.
The gas is usually stored between April and November when traditionally prices dip because there is less need.
Since stored supplies are so depleted this year, replenishing them is expected to keep prices up this summer.
``People who are heating with natural gas will have to pay more on their utility bills. That's always a problem,'' said Carol Biedrzycki, executive director of the Texas Ratepayers' Organization To Save Energy.
Also, consumers could see the price reflected in their electric bill.
``We're using natural gas more and more to generate electricity,'' said Carol Biedrzycki, executive director of the Texas Ratepayers' Organization To Save Energy. ``An increase in natural gas prices is also going to cause an increase in electricity prices.''
For many years, natural gas prices were set low by the federal government to encourage people to use it because it is kinder to the environment.
But under the regulatory environment, an artificial shortage was created in the '70s and the government phased out the pricing regulations to encourage usage.
Following deregulation in the '80s, a number of high-priced contracts were made which inflated the price of natural gas.
``The `gas bubble' finally went away in the last couple years,'' said Howard Matson, a spokesman for Lone Star Gas, Texas' biggest gas company and a subsidiary of Enserch.
Since the end of that era, the industry has seen lower prices.
``We have had a horrible gas market, we just turned our first profit in seven years,'' said Texas oilman Boone Pickens of first quarter results for his natural gas company Mesa, Inc.
But with what looks like a turnaround, the oil business' ignored sibling is finally coming into its own.
In Kansas, where Mesa's prolific Hugoton field is located, natural gas production has surpassed oil revenues. Last year, 400 wells were drilled in the field.
``Typically, the gas is an offshoot of the oil,'' said economist Ray Perryman. ``It all got trapped in the same cracks of the rocks back when the dinosaurs were here.''
Natural gas once was so disregarded that when drillers found natural gas they would burn it off at the well head rather than produce it, said Perryman.
``Now, in many cases it's worth more than the oil,'' he said.
Irving-based Exxon Corp. saw its natural gas production go up 16 percent in the first quarter of this year.
``Colder weather had a favorable impact on natural gas volumes and prices, and natural gas production was the highest in 15 years,'' Exxon Chairman Lee R. Raymond said.
Staff writer Greg Edwards contributed to this story.
LENGTH: Medium: 90 lines ILLUSTRATION: PHOTO: AP. John Roberts, senior technician at Lone Starby CNBPipeline, turns a valve on a filter Tuesday at the South City Gate
gas transmission site in Dallas. color.