Alberta gas producers have approved a new contract with California buyers that includes slightly lower wellhead prices and more flexible pricing terms.
The deal was approved between a 190 member supply pool and Alberta & Southern Gas Ltd. (A&S), Calgary, which buys gas for Pacific Gas & Electric Co., San Francisco. It covers gas sales to California of as much as 1 bcfd.
The 1 year agreement, effective Aug. 1, will apply a flexible price formula to gas sales. A basic volume of 212 MMcfd will receive $1.52 (U.S.)/Mcf. A&S also will buy 200 MMcfd at prices paid for other Alberta gas in the California market. It will have the right to buy added volumes at prices indexed to gas sold into California from the U.S. Southwest.
Canadian producers received an average $1.55/Mcf under their previous contract, but about 40% of volumes were at a fixed price.
Ballots cast by producers were to be verified by regulatory agencies in Alberta and British Columbia.
The more flexible price terms in the new contract are seen as a positive development for negotiations in a dispute over long term contracts.
The California Public Utilities Commission has ordered PG&E to impose a capacity brokering system on its Alberta-California pipeline system in October. The Alberta government and a Canadian producer supply pool said this would violate existing contracts. The parties recently reopened talks aimed at setting the dispute.
SALES TO CONSUMERS
Alberta producers also settled for lower prices in a new contract with Consumers Gas Co., Toronto.
Western Gas Marketing Ltd., Calgary, said the contract sets an initial price of $1.70/Mcf, down from $1.90.
A two tier price system will take effect Nov. 1. Consumers will pay $1.69/Mcf for gas bought under long term contracts, including a 20 premium for security of supply. Consumers will pay $1.49/Mcf for the other half of volumes purchased.
The deal is subject to approval by the Ontario Energy Board.
PRICE SLIDE
Meanwhile, a Calgary economic consultant forecast continued erosion in prices for western Canada gas and for sulfur because of surplus supply.
Coles Gilbert Associates Ltd. forecast a 1992 average gas price of $1.25/MMBTU.
The company expects gas markets to begin a recovery in 1993 due to rising demand and shrinking supply caused by a drilling slump. It said there will be a modest recovery in 1993 and potential for a strong price recovery to $2.55/MMBTU by 2000.
Coles Gilbert said declines in sulfur prices stem from an international supply glut. It estimated the Caroline sour gas project in Alberta will add 1.4 million metric tons/year to supply when it goes on stream late this year (OGJ, June 22, p. 23). In addition, Freeport McMoRan Inc.'s 2 million metric ton/year project in the Gulf of Mexico is almost complete.
"Collectively, these two projects will increase world supply about 20%," Coles Gilbert said. "Sulfur prices could remain weak for some time and could decline further."
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