โ Scribed by Woodward, John S.
No coin nor oath required. For personal study only.
here is a consensus building in the natural gas industry that most of the future growth in sales will occur because of an increase in the use of gas for power generation. Certainly, there are environmental, operational, and economic reasons for growth to occur in this area. The power generation market, however, has many unique requirements that can make it particularly difficult for the gas industry to supply. Until these obstacles are overcome, growth through this market may be limited.
One particular area of perceived difficulty is contracting for long-term, reliable, affordable gas supplies. This issue has a historical basis. Many gas pipelines and producers litigated or settled longterm contracts during the regulated era when contract prices became unsupportable in the market. Their movement out of long-term contracts left many end users with doubts about the industry's willingness to supply gas reliably.
In returning to the long-term contract market, the author's company has invested considerable time studying the requirements of the power-generation industry. It was found to be much like any other industry: Its powergeneration & envimnmen-achieve profitability tal solutions, for the Natural Gas Business unit of Chevron USA by creating a finan-Production company, in HOUS-cially and operationton. This article was developed ally viable project, in collaboratfon with Mary Hunt, often with minimal equity at risk. These an analyst in the Natural Gas Business Unit.
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An entirely new kind of long-term contract is emerging in the natural gas industry, LLT the glacial progress of the world's longest sausage, the gas bubble, imperceptibly grinds to an end. No more are twenty-year contracts being made between pipeline andproducer atfiredprices or even with a rgerence
as is going more long-term. For ex-G ample, the goal of Natural Gas Clearinghouse, the author's company, is to sell 70 percent to 80 percent of its gas under long-term sales agreements. Currently at NGC, the mix between term and spot volumes is roughly fifty-fifty. By contrast, as recently as 1989 s