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When Natural Gas Falls Short, Wasatch Energy Finds a Supplier

Posted on: Wednesday, 13 July 2005, 21:00 CDT

Jul. 12--Karen Long of Wasatch Energy discovered the shortage just as the trading day was winding down.

Customers on the SoCal Pipeline in southern California used 20,000 more decatherms of natural gas than anticipated. Long needed to find more gas and fast or face penalties from the pipeline operator of $15 to $25 for every decatherm the company was short.

"It is not something that's even pleasant to think about," she said.

Long turned to Wasatch Energy's trading desk for help. Within moments, natural gas trader Craig Duke located the needed 20,000 decatherms -- roughly equivalent to 20 million cubic feet of gas -- and arranged to buy the needed gas from another gas-trading company, balancing the company's SoCal account.

The transaction was among hundreds of similar deals carried out every day at the North Salt Lake offices of Wasatch Energy, a marketing company that conducts its business over the invisible middle ground of the nation's natural gas industry, between the roughnecks with their drilling rigs and the multitude of businesses and homeowners who use natural gas. Wasatch Energy buys gas from an estimated 150 producers and then secures space on interstate pipelines so it can deliver the commodity to approximately 500 customers throughout the West. The gas-trading company employs 36 people.

"As a marketing company, we operate with very little risk," Wasatch president Todd Cusick said. "For every purchase we make, we'll usually have a buyer on the other end."

Companies such as Wasatch Energy fill an important niche in the natural gas industry.

They stand ready to buy natural gas directly from exploration and production companies of all sizes. And they play a particularly important function from small production companies whose operations are too tiny to support their own sales and marketing staffs.

On the other end, Wasatch Energy is a source of natural gas for consumers who would find it inconvenient, or even impossible, to deal directly with the companies producing the fuel.

Even production giants such as Utah-based Questar Corp. frequently turn to companies like Wasatch Energy to either sell or buy the natural gas needed by its retail distribution system in Utah.

Questar Corp., for example, sells gas it produces from a few scattered wells in the nation's heartland to an outside marketing company. "Our midcontinent wells just don't have that critical mass of production where we would want to handle the marketing ourselves," said Chuck Stanley, president and chief executive officer of Questar Market Resources.

Founded in 1993, Wasatch Energy has grown rapidly in recent years with the increased demand for natural gas as a source for electrical power. In addition to its office in North Salt Lake, the company also operates offices in Seattle, San Diego, Albuquerque, Denver and Chicago.

Although Wasatch typically makes only a few cents off of each cubic foot of natural gas it buys and sells, it annually markets between $750 million and $1 billion worth of natural gas. As a result, some of its contracts are huge.

In mid-June the company was awarded a $60 million three-year contract to supply natural gas to several U.S. military installations, including Hill Air Force Base and the Tooele Army Depot. The contract represented an extension to an existing five-year pact. More recently the company received the contract to supply natural gas to Nellis Air Force Base in Nevada and White Sands in New Mexico.

"The government is among our largest customers," Cusick said, adding Wasatch Energy is waiting to hear the results on several other bids for government contracts.

Back at her desk, Long is intensely studying her computer screen. "Our production [or the amount of gas the company buys from producers] goes up and down all the time," she said. "Our pipeline space, though, is fairly constant, so it is a juggling act to get natural gas to where it needs to go."

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STR,

Source: The Salt Lake Tribune

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