Home > Chemical News

Chemical News

US FERC monitors Florida gas market after prices spike

https://www.chemnet.com   Aug 11,2010
The US Federal Energy Regulatory Commission is monitoring the natural gas spot market at the Florida city-gates after prices shot up to $14/MMBtu last week at a time when generator demand was high and pipeline maintenance limited supplies, a FERC spokeswoman said.


"Our staff is on it. I know there are a lot of extenuating circumstances with that, but our staff is monitoring it currently," FERC spokeswoman Tamara Young-Allen said. She added that general market observation is common and no formal investigations have taken place.


Spot prices in the Florida delivered market averaged more than $10/MMBtu throughout that first week of August, making them the most expensive spot prices in North America. Prices Monday cooled to the upper $5/MMBtu range.


The pricing point hit its peak of $14 Thursday, prompting some in the market to question the forces that pushed prices to a level seen only a few dozen times over the past decade. In the summer of 2009, prices never topped $8, according to Platts historical data. Prices regularly averaged between $10 and $12 in the summer of 2008, Platts data show, but that was largely because of the threat and subsequent onset of hurricanes Gustav and Ike.


"At $14 for gas, something isn't right," one regional trader said, noting a major disconnect between the city-gates prices and that of the sub-$5 Florida Gas Transmission zone 3 prices, given that transport costs between the two markets is about 30 cents, the trader said.


The surging gas prices pushed some utilities over to buying fuel oil to run their plants.


According to market sources, several power generators with capabilities to burn oil were buying low sulfur diesel fuel, a major shift since heavy oil has carried a much higher cost per BTU than natural gas.


When the city-gates averaged $11.395/MMBtu Friday, the equivalent fuel price was $74.09/b, Platts assessments showed.


Florida Gas Transmission is planning an 820,000 MMBtu/d expansion that will add more than 480 miles of pipeline from Alabama through Florida, as well as adding a new compressor station in the southern part of the state. The $2.45 billion project is expected to be in service in spring 2011.


"I believe Phase 8 when completed will help with the issue, but I bet we have not seen the last of $14 prices at the Florida city-gate," said Mark Cook, principal with SGR Holdings, a storage facility company that services Florida players.
 Print  |    add to Favorites  |    Close