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Gas and Public Property Committee discusses natural gas futures

Posted March 10, 2015 11:00 pm

By Pete Spitler The Herald Tribune

CHESTER -- Winter may seem to be over and natural gas prices seem to reflect that, according to materials discussed by the Chester Gas and Public Property Committee during its monthly meeting on Tuesday.

According to information provided by GPPC Chairman Dan Ohlau, natural gas prices could remain below $3 per unit until December.

"This is very odd," said Chester Gas Superintendent Jeremy Homan. "For futures to be that low for that long."

The committee members debated whether prices have bottomed out. A report from CME Group, which was included in the packet, predicted natural gas prices would rise to above $3 by December and stay above that level through September 2016.

"This year, the concern for low supplies is not there," Ohlau said. "There is not as much of an urgency to contract gas."

The committee then discussed buying 7,500 units between June and August for storage purposes that could make sure the city's 2,100 natural gas customers are covered for the next winter season.

"We're at the point where we should start thinking about contracting some, but I'm not sure if we are all the way there or not," Ohlau said. "Things like this are so volatile. You can't be left short in wintertime."

The harsh winter of 2014, widely reported to be Illinois' worst in 20 years, resulted in a yearly average price of $4.41 per unit - the highest in the past five years.

A year later and the market shows a potential for 10 straight months of natural gas below $3 per unit, including February and March of this year.

"This is all driven by weather," Ohlau said. "No one believes that until you look at the prices.

"Forty-two percent of the gas we burned in February we bought at these lower prices."

Ohlau also pointed to fewer drilling rigs in 2015 compared to four years ago. According to Market Realist, that is due to a combination of higher efficiency, turmoil in the crude oil market and shaky producer confidence.

Documentation shown to the media at Tuesday's meeting showed the U.S. natural gas industry had 925 rigs nationwide in November 2011. That is compared to around 300 in January 2015.

The U.S. Energy Information Administration storage report for Feb. 27, the latest data released, showed an estimated 1,710 billion cubic feet (Bcf) of natural gas in storage across the nation. That's a decline of 228 Bcf from the previous week, but stocks were still 492 Bcf higher than the same point a year ago.

The committee members also heard Homan's budget requests for the next fiscal year. Homan asked about the possibility of purchasing a line locator, which would help identify and map all the underground gas piping in the city.

The locator, which would be acquired through MidAmerican Technology Inc., has a price of $4,585 and its purchase would have to be approved by the Chester City Council first.

"It is Bluetooth adaptable," Homan said. "You would be able to add GPS locators and be able to download that information onto a computer."

The committee also discussed replacing or adding signage on 30 riser valves indicating it is a natural gas line. The last time the department purchased signs was 2008.

"We have to replace some of these signs that are made of plastic," Ohlau said.

Finally, Homan discussed a Geographic Information System (GIS) service from the St. Louis-based engineering firm of Thouvenol, Wade and Moerchen Inc. (TWM) that would take the city's gas line mapping data and make it accessible via online storage.

Homan said the city's maps are from 1959 and the other option would to put the diagrams into a CAD drawing superimposed on a Google Earth image, but that would not be editable.

The cost for a three-year contract is $6,500 a year, while a five-year contract costs $5,500. Another $2,000 in device costs would be added, but no money is required up front.

"The company will charge per hour to add water and sewer," Homan said.

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