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Enron Mail |
Rod:
As we discussed here are the bulletts that summarize what we heard from our consultants. Overall demand picture Believe it will be 2006 before the California market will get back to 2000/2001 demand levels 2002 demand down approximately 900 mmcf/d 2003 demand will be flat 2004 growth in demand will begin 2005-2006 return to 2001 demand levels Reasoning: 2001 was a dry year - the lack of hydro generation created an additional 600 mmcf/d demand for gas in California Anticipated generation capacity overbuild in California - new more efficient power plants with better heat rates will displace older gas fired generation, reducing the amount of gas required to generate a MW of electricity on the margin California electricity rate increases have curtailed demand for power and subsequently, gas Gas transmission capacity into the state Over the next two to three years there will be an additional 2.0 Bcf/d of transmission capacity into California 800 mmcf/d in 2002 900 mmcf/d in 2003 (Kern River expansion) 300 mmcf/d (El Paso conversion of All American oil line and power up) San Juan basin gas San Juan basin production is declining first half of 2001 vs. first half of 2000 production off by approximately 200 mmcf/d Rockies gas will not replace declining production in the San Juan San Juan gas will move closer to Permian pricing The consultants believe that the combination of these factors will put decontracting pressure on existing transmission into the state of California, and especially the El Paso and Transwestern lines. However, the "wild card" in their view is unforeseen California power demand growth. As we discussed, JPMorgan would like to hear your views on the above issues. Please give me a call when you have had sufficient time to digest and we can set up a conference call to make the most efficient use of your time. Thanks Rod Brent Also, when you have had a chance to look at sales gas volume growth please e-mail the volume numbers to me...thanks
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