Message-ID: <10540568.1075848211896.JavaMail.evans@thyme>
Date: Thu, 8 Feb 2001 03:56:00 -0800 (PST)
From: margaret.carson@enron.com
To: rstillman@netscape.net
Subject: INQUIRY TO KEN LAY RE GAS STORAGE
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In referring to your  e mail to Ken Lay,  the reason  we   see total  US  gas 
storage volumes BY month in 2000  decrease  by    .200 TCF  to  .400 TCF  
below   the levels by month  in 1999 is due to  the following  reasons:

A.  STORAGE  COSTS   Putting  gas into storage for  a  several month period  
typically costs  50 cents  to  $1.00 per  MCF or more; 

B.  GAS COSTS   This cost  becomes  too  high to  put  gas into storage   
when average  U.S.  prices  start rising because  the  need  to USE  the gas 
itself,  not store  it,   becomes  greater than the need  to put it into 
storage and pay storage  costs   for  future  needs.   

For  example    at  $2.00 plus  50 cents  or   $1.00 for heat season storage 
this cost combination is typically economic;   but  the situation becomes 
cost prohibitive  when demand in the market for gas  is  so great to USE it  
that it moves  the price  to   $3.00  or more  or as high as   $4.60  --  to 
which  one would  then also have to  add   50 cents or  another dollar to 
store it.

  TOTAL  GAS IN STORAGE  Source:  Table 10  US DOE EIA November 2000;  Gas 
Prices  per  Table   4

APRIL 1999 5.876 TCF             $1.86 MCF US  Avg Gas  Wellhead Price
MAY  6.206     2.16
JUNE  6.519     2.12
JULY  6.749     2.18 
AUG  6.978     2.49
SEP  7.292     2.61
0CT  7.443     2.50
NOV  7.445     2.67
DEC  6.906       2.20

JAN 2000 6.088   $ 2.12
FEB  5.672     2.30
MAR  5.514     2.36
APR  5.547     2.55    
MAY  5.782     2.90
JUNE  6.061     3.73
JULY  6.351     3.70
AUG  6.544     3.67 
SEP  6.827     4.26 
OCT  7.072     4.61
NOV  6.779

Per  Table   3,   U.S.  gas  consumption  rose  .500 TCF  in year 2000  
versus   1999;  but  additional supply from US and Canada  Table   2,     was 
just  .100 TCF  so   to meet  the market  demand    .400 TCF  of  gas had to 
come  out of  storage.
Hope  this helps clarify.  You can see these  reports on the  DOE   web  
site   at   www.eia.doe.gov  and click on Natural Gas Monthly Statistics.   
Regards,  M  Carson  Enron Competitive  Analysis