Severe U.S. winter leaves questions for gas, power markets

marinelink.com
Friday, March 07, 2014

Natural gas pipelines and power utilities across the United States struggled for several weeks to keep lights on and homes warm through the coldest winter in decades, but it may take many months for the cost and the fallout of the so-called "polar vortex" to work through the energy chain.

As sub-freezing temperatures spread in January and February, spot natural gas prices spiked at many gas delivery points in the Midwest, Northeast and New York, pushing wholesale power prices above $100 per megawatt-hour for days at a time.

Customers will soon receive gas and electric bills, reflecting the higher cost of gas in January.

In unregulated power markets, January bills will present a "double whammy," said Nick Akins, chief executive of American Electric Power Co, one of the largest U.S. electric utilities that generates and delivers power to 5 million customers in 11 states.

"The energy price took off and they are going to get a big surprise since they are using more electricity to start with and prices went way up," Akins said.

In regulated markets, utilities may be able to pass on higher fuel costs quickly. Elsewhere, higher winter gas prices may not be seen until utilities seek regulatory approval later this year.

Across the country, the U.S. National Oceanic and Atmospheric Administration said the 2013-2014 winter season so far has been 4 percent colder than normal and 12 percent colder than last year.

While painful, those utility bills represent a sliver of the potential cost and impact of the harsh winter, gas and power industry executives said at the IHS CERAWeek conference in Houston, an annual meeting of global energy leaders.

The stress seen on both the gas and power infrastructure raises questions about fuel diversity, environmental regulation, grid operation and market structure, participants said.

Akins said 89 percent of the nearly 7,200 megawatts of coal-fired generation that AEP expects to retire in the next two years was running during the recent arctic blast.

"You have to think twice about taking capacity out of the market; that's, in effect, is what the (environmental) regulation and the market construct is doing," said Akins.

As the nation increases its reliance on gas for power generation, performance of the natural gas network should be reviewed, Akins said.

"We need to make sure that the underlying gas infrastructure is good if we are going to rely on it," he said.

The cold snap showed that the current gas market, while tested, is much more robust than during previous weather or supply events that pushed gas prices at the Henry Hub above $10 per million British thermal units for extended periods, said the head of a gas industry trade group.

"To see record-setting cold, record-setting demand for gas and daily draws from storage and we only saw (Henry Hub) gas to $6 and quickly recede shows how robust the system is," said Marty Durbin, president of America's Natural Gas Alliance.

In New England, where gas delivery was hampered by constrained pipelines, Durbin said just 1 percent of the trades for 18 billion cubic feet of gas needed on Jan. 7 came at the very high spot market price.

The severe weather showed more investment is needed to move abundant new supplies of shale gas to markets, said Gregory Ebel, president of Spectra Energy Partners

It also showed how such investment can dampen gas volatility, he said, citing a new 12-mile pipeline built by Spectra to supply gas to New York.

The new supply line reduced the premium New York customers paid for gas this winter to 13 percent over the nearby Pennsylvania market, down from a 64-percent premium seen last winter, he said.

"Are we going to get rid of (price) volatility? Probably not," said Ebel.

Lynn Good, chief executive of Duke Energy, the nation's largest utility with 7 million customers, said many lessons will be learned from the polar vortex.

"I view this as a warning," Good said. "It gives us chance to understand where the gas infrastructure is; to understand the value of very diverse resources and how well they worked. We need to stress the system every once in a while," Good said.

 

By Eileen O'Grady

Maritime Reporter October 2013 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Finance

Norvestor to Become PG’s Largest Shareholder

Norvestor VI, L.P., a fund advised by Norvestor Equity AS, announced it has signed an agreement to invest in Ing Per Gjerdrum AS including its subsidiaries PG Hydraulics AS and PG Construction AS.

GasLog Closes First Option Vessels Dropdown

GasLog Ltd.  announced today the closing of the sale of two modern liquefied natural gas (“LNG”) carriers, the Methane Jane Elizabeth and Methane Rita Andrea,

Brent Holds Above $97, Eyes Worst Quarter Since 2012

Brent crude futures hovered above $97 a barrel on Tuesday, aided by firm U.S. and Chinese data, but the oil benchmark was on track for its deepest quarterly drop

Energy

Leak May Sideline New Mexico Nuclear Waste Site

It may be five years before a nuclear waste dump in New Mexico closed by a radiation leak is fully operational again, and the facility will need at least $240

Imperial Oil Completes Maintenance at Kearl Oil Mine

Imperial Oil Ltd said on Tuesday it has completed a two-week major maintenance turnaround at its 110,000 barrel per day Kearl oil sands mine in northern Alberta.

Swissco Doubles Rig Fleet

SGX Mainboard-listed Swissco Holdings Limited an integrated, international marine services provider, today announced having completed the acquisition of four additional mobile offshore drilling units,

Fuels & Lubes

Kounalakis Joins OW Bunker N. America

OW Bunker, a reseller and physical supplier of marine fuels, announced the appointment of Georgia Kounalakis to its physical supply operation in North America.

Louisiana to Get Natural Gas Liquefaction and Fueling Facility

Tenaska Bayou LNG expected to meet growing marine, transportation and oil and gas exploration and production demand on the Gulf Coast Tenaska NG Fuels, LLC and Waller Marine, Inc.

Power and Endurance Ready for Austrailian Waters

Wamalhanha is the final newbuild in a series of six tugs of the Robert Allan Design, RAstar 3200 where her main duties will be terminal activities, escort duties, ship assist, towage duties.

LNG

US Shipyard to Produce GTT's LNG Membrane Tanks

Gaztransport & Technigaz (GTT), a designer of membrane containment systems for the maritime transportation and storage of liquefied natural gas (LNG), via its U.

Skangass Builds LNG Terminal in Pori, Finland

With investment support from the Finnish Government of 185 million NOK Skangass has decided to build a new import terminal for LNG. The terminal will be completed in 2016.

Louisiana to Get Natural Gas Liquefaction and Fueling Facility

Tenaska Bayou LNG expected to meet growing marine, transportation and oil and gas exploration and production demand on the Gulf Coast Tenaska NG Fuels, LLC and Waller Marine, Inc.

Logistics

MOL Restructures Asia to S. Africa Service

Mitsui O.S.K. Lines, Ltd. (MOL) announced the restructuring of its existing Asia to South Africa liner services into two direct loops. One service will call South China,

DMR Examines Container Terminal Congestion Issues

Container port congestion has been hitting the headlines recently, but the reasons for it vary widely and in many cases it is only a short term issue. Certain world

Signet Transports Second LLOG Rig to GofM

On September 14, five Signet Maritime ASD/Z-Drive tugboats, the SIGNET ENTERPRISE, SIGNET RELIANCE, SIGNET MAGIC, SIGNET WEATHERLY, and SIGNET VOLUNTEER successfully

 
 
Maritime Contracts Maritime Security Maritime Standards Pipelines Port Authority Salvage Ship Electronics Ship Repair Shipbuilding / Vessel Construction Sonar
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2956 sec (3 req/sec)