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Natural Gas Supply Called 'Sufficient'

But a report warns that California is vulnerable to price increases triggered by shortages.

May 29, 2003|Elizabeth Douglass | Times Staff Writer

California's access to natural gas supplies is adequate to cover rising demand for the next 10 years, but a report Wednesday warned that the state remains vulnerable to price spikes triggered by nationwide shortages.

In a preliminary report on the natural gas market, the California Energy Commission said natural gas supplies will be "sufficient but more costly" until 2013 because production cannot keep pace with demand.

That lag between supply and demand has government and industry officials worried that a hot summer could prevent companies from stockpiling the natural gas needed to cover higher demand this winter.

Natural gas usage typically spikes in the winter as households and businesses in colder climates turn on the heat. But demand now is strong year-round because a growing number of power plants run on cleaner-burning natural gas. Increases in electricity use -- whether for air conditioning or industrial plants -- boost demand for natural gas.

In California, for example, nearly 40% of the electricity used is generated by plants that run on natural gas, said Claudia Chandler, assistant executive director of the state Energy Commission. These days, much of the state's natural gas is imported from Canada and elsewhere in the U.S., forcing California to compete with other states.

"More and more, our gas picture is tied to the nation," Chandler said. "If companies in other parts of the country don't fill their [natural gas] reserves now ... and they go into the winter months low, that drives up prices and we will feel it."

Natural gas stockpiles nationwide are at 990 billion cubic feet, 35% below the five-year average, and 44% lower than 2002 levels, according to the federal Energy Information Administration. California, with about 120 billion cubic feet of natural gas in storage, is about 25% to 30% below last year's levels, Chandler said.

A separate report Wednesday by the natural gas industry predicted that high summer temperatures would further deplete the nation's anemic inventories, resulting in higher prices.

Earlier this year, natural gas prices soared because of short supplies, high crude oil prices and an unusually long and cold winter in the East. The price closed up 4.5 cents at $5.945 per British thermal unit Wednesday on the New York Mercantile Exchange.

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