Canada Cheap Natural Gas for East Coast Consumers Becomes a Fading Dream

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Cheap Natural Gas for East Coast Consumers Becomes a Fading Dream Canadian Press

December 08, 2000

HALIFAX (CP) - Natural gas from offshore wells was once promoted to Atlantic Canadians as a cheap fuel, but hopes for long-term low prices are turning to vapour as a chilly winter begins.

"Maritimers will pay, even if (the gas) is in their backyard," says gas analyst Peter Linder of Research Capital Corp. in Calgary. Last spring, Linder accurately predicted one of the highest natural gas price spikes in Canadian history. Now he's saying the skyrocketing prices caused by heightened U.S. demand will hold, making gas an increasingly costly item despite development of Canada's new energy frontier off Sable Island, N.S.

When natural gas companies were competing for distribution monopolies in Nova Scotia and New Brunswick in April 1999, they predicted a cheap form of energy for a region that has suffered in earlier energy crises.

At a public hearing, Andrew Rea, the former president of Sempra Atlantic Gas, said the gas would "result in guaranteed energy savings to Nova Scotians that we expect will be in the 25 to 30 per cent range."

Since then, gas prices have quadrupled. The commodity traded at $8.45 US per million BTU on Thursday, up from $2.31 in February.

Meanwhile, the price for the major competitor - heating oil - has gone from about 45 cents a litre last winter to a current level of 58 cents.

Dave Collins, vice-president of Wilson Fuels, an independent heating fuel dealer in Halifax, says the widening price gap is good news for his industry.

"We've got a 20 per cent price advantage right now, per unit of energy," he says.

Natural gas distributors Sempra Atlantic and Enbridge Gas New Brunswick have told regulators they'll sell their fuel to new customers next year at rates five per cent cheaper than heating oil in Nova Scotia and 30 per cent less in New Brunswick.

But prices in the longer term are another issue and Linder doubts gas marketers will be pushing for new business this winter. He said heating oil's price advantage "means gas companies will have very little incentive to look for new customers."

There have also been delays in both provinces in delivering gas to average consumers.

In New Brunswick, construction delays have put off delivery of natural gas in Moncton, Oromocto, Saint John and Fredericton from Nov. 1 until February, at the earliest. In Nova Scotia, gas isn't expected until next spring.

Once the companies start selling, Ian Doig, a Calgary energy analyst, says utilities are allowed to make up for any losses they incur by increasing rates later.

"It's going to need a lot of good public relations to explain to the consumers that it isn't all roses at the end of the line and that there's going to be some expenditures," he said.

Linder says, "eventually they'll try and recover their money. The consumer might be safe today and they'll pay for it later on."

The vice-president of Enbridge Gas New Brunswick says his company will push forward with gas sales to recover a $23-million investment in pipelines. Andrew Harrington said Enbridge plans to provide gas to 1,400 customers in 2001.

Predictions of price hikes are premature, said Harrington.

"It's just a lot harder for us to make money in this current heating season," he says.

A spokeswoman for Sempra Atlantic Gas said the company will apply for its price levels before the Utility and Review Board in February.

Lori MacLean said Sempra's commitment to offer gas at prices five per cent below heating oil costs "stands."

While consumers still aren't celebrating the arrival of gas, there are signs that the offshore exploration industry is booming as a result of soaring demand.

Greg Noval, president of Canadian Superior Energy Inc., says Nova Scotia's offshore is now like the "Gulf of Mexico in the 1940s."

The company has committed $27.7 million towards exploration, one of a group of proposals to explore for gas offshore that was announced in early November.

Last winter, PanCanadian Petroleum announced it had made a "potentially significant gas find" in the Atlantic Ocean that could lead to a second natural gas project off Nova Scotia.

http://denver.petroleumplace.com/egatecom/scream/2000/12/08/eng-canadianp_business/eng-canadianp_business_151146_128_15312367864.html

-- Martin Thompson (mthom1927@aol.com), December 08, 2000


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