Message-ID: <4483179.1075848288477.JavaMail.evans@thyme> Date: Fri, 2 Feb 2001 03:23:00 -0800 (PST) From: sean.boyle@enron.com To: chris.germany@enron.com, dick.jenkins@enron.com, scott.neal@enron.com, brad.mckay@enron.com, scott.hendrickson@enron.com Subject: DTI (CNG) Storage Offering. Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Sean Boyle X-To: Chris Germany, Dick Jenkins, Scott Neal, Brad McKay, Scott Hendrickson X-cc: X-bcc: X-Folder: \Chris_Germany_Nov2001\Notes Folders\All documents X-Origin: GERMANY-C X-FileName: cgerman.nsf I met with Jeff Kiester of DTI yesterday regarding the storage offering they have on the market. They have 3 Bcf storage capacity and 30,000dt/d of FT-GSS up for bid by 2/12/01. However there will be up to an additional 10 Bcf of storage capcity available before 4/1/01 depending on additional turnback. All of this capacity is utility turnback mainly, East Ohio, National Fuel and RG&E. Potential uses for DTI storage: 1. Desk use - If we buy the storage without the transportation we would inject and withdraw at SP. If we do submit a bid, I would recommend that we try to incorporate free intramonth injection capability, effectivly giving us a no-notice type service that we could use to take physical positions in the cash market. The current park/loan rate is $0.07 /dt/d, it seems we utilize this 2-3 times a month. 2. VNG - AGL could want to look into adding storage to the VNG portfolio, the drawback is that the PL1 line has no excess deliverability, VNG's need is more a peak day issue. 3. Partner with EES - Paul Tate from EES also sat in on our meeting, he expressed an interest in looking into potential partnering oppourtunities with the East desk regarding markets on TCO and DTI. This storage offering for example could be something we partner on. I plan to meet with Paul at the beggining of next week to discuss further (Dick I will check with you on your availability). Jeff also indicated there will be more transportation capacity turned back in the near future. There will be a posting for 75,000 dt/d of Lebanon - Leidy capacity coming out in the next few weeks. Market view on capacity release: With the utilities turning back transportation, the economics of the capacity release market will change. The utilities have historically released transportation in the summer months for $0.05 or less (as low as $0.01) in order to recover something from their asset. DTI will now be the marketer of the turned back capacity. Historically the pipeline has been very reluctant to sell capacity below max rate in the winter and less than 50% ($0.12 at current rates) in the summer. Jeff indicated that his view is that capacity values will increase slighly this summer and significantly next summer due to the new power gen load coming online 2002. As part of DTI's last rate case settlement FT-GSS holders can no longer release transportation in the summer, that went into effect last summer-00. Although the capacity release market was a little tighter last summer it did not significantly drive up capacity release prices in the summer-00. My view is that two of the three power gen loads will be interuptible and therfore will not sigificantly increase the overall load factor of the system. The bottom line is that DTI is competing with capacity release and I feel there will be enough capacity release available on the market this summer to force DTI to sell it's capacity below 50% of max rate. However capacity release prices may increase next year as more utilities turnback capacity and the new power generation may be in the capacity release market. Market View on Basis on CNG for Summer 01 & Summer 02: With the increased load and potentially low storage inventory level going into this summer, basis could be strong vs historical prices. However, with the inception of M&NEP delivering 400,000dt/d into the Northeast last year CNG basis (summer strip) was less than $0.20 in Jan-00 and Feb-00, even though the April 1 storage inventory level was the lowest since 1996. In 1996 CNG Apr-Oct strip traded as high as high as $0.31 in Feb-96 and dropped as low as $0.21 by May-96. DTI summer load is averages 2.5 - 3.0 Bcf, I don't think the 100,000dt/d load of the new power gen load will be significant this summer considering the additional supply coming in from Dracut. However with American National Power Inc (34,000Dth/d) and El Paso Gas Services Co (139,000dt/d) both coming online in 2001, that have contracted for around half of the Dracut supply, this may cause sumer basis prices to increase from current levels (Apr-01-Oct-01 strip $0.33) this summer and depending on storage inventories 4/1/02, Apr-Oct-02 basis may be also get stronger.