X-Message-Number: 21938
From: "Mark Plus" <>
Subject: Manufacturers feel the heat of gas shortage 
Date: Mon, 09 Jun 2003 17:45:40 -0700


Manufacturers feel the heat of gas shortage
By Sheila McNulty
Published: June 9 2003 20:31 | Last Updated: June 9 2003 20:31

Jeff Uhlenberg's company is "being killed by natural gas prices".

Donovan Heat-Treating, a Philadelphia-based metal heat-treating operation, 
has had its gas shut off twice in two years when his distributor ran low on 
natural gas supplies and interrupted his service. He was forced to purchase 
propane at a higher cost.

"If we don't get real serious about increasing domestic natural gas supplies 
real fast," Mr Uhlenberg said, "smaller and bigger manufacturers across the 
country are going to be put out of business."

While the crisis in domestic oil supplies is well known, few have heeded 
industry warnings about the economic impact of "the other energy crisis" - 
high natural gas prices produced by falling US supplies and rising demand. 
"Politicians focus on oil, which is a global commodity about which they can 
do almost nothing, and have ignored the pending gas problem, on which they 
can actually make a difference," said Robin West, chairman of PFC Energy, a 
Washington -based industry consultant.

Spencer Abraham, US energy secretary, has taken up the cause, calling an 
emergency summit of the National Petroleum Council industry advisory board 
on June 26. However, in a letter to 30 senators released on Monday, he said 
there were "limited opportunities" to boost supplies over the next 12-18 
months. "Therefore the emphasis must be on conservation, energy efficiency 
and fuel switching," he said.

Natural gas inventories in April stood at just half of the year-ago levels, 
and 42 per cent of the five-year average. That shortage has been reflected 
in prices, said to be up 700 per cent over the past three years.

Andrew Weissman, chairman of Energy Ventures Group, an information 
technology company, said prices could go two to three times higher, as 
demand rose. He noted that more than $100bn- worth of gas-fired power plants 
had been built in the last four years - "enough to serve Great Britain, 
Germany and a good chunk of France". Yet US supplies of the gas required to 
run them are below that needed to sustain growth. "We are at a fundamental 
transition point," Mr Weissman said.

The industry believes the solution would be to open what Mr Abraham says are 
the estimated 40 per cent of potential US gas resources that lie beneath 
federal lands either closed to e xploration or severely restricted.

Yet such exploration and production might come too late to stop already 
troubled industries from accessing cheaper and more abundant supplies 

Though there are accessible, unproduced pockets of natural gas in the US, 
investment bank Bear Stearns recently said big oil companies with the 
resources to find new gas fields had m oved exploration and production 
abroad. "These are the decisions we are forced to make while we wait for a 
comprehensive energy policy from Washington," said Carol Dudley, business 
vice-president for Chlor-Alkali Assets, a unit of Dow Chemical. "American 
energy must become globally competitive now. If we're having this same 
conversation next winter, it will be too late."

Ellen Hannan, an energy analyst, said: "New [US] reserves are likely to be 
discovered in frontier areas, in deep waters or at greater depths within the 
earth. The lack of dollars at risk will accelerate our dependence on 
external sources to meet our future demand for natural gas."

Importing liquefied natural gas has been slowed because there are only four 
terminals to receive LNG from overseas, and those facilities suffered 
bottlenecks and contractual issues, Mr West said. More than 30 new terminals 
had been proposed, he said, but the US government and states had been slow 
to develop a permitting process. Meanwhile, there is no pipeline to get gas 
from Alaska and northern Canada.

A particularly hot summer or cold winter could suck up remaining supplies.

"People shouldn't make the mistake deciding, if we don't have a crisis this 
summer, there is no crisis," Mr West said. "If it doesn't happen this 
summer, it is going to happen soon."

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