211 Preface

This is the second full revision for this chapter, Natural Gas Purchasing. Chapter 21 was originally written when the book was published in 1993. Rewrite for the first revision was a completely new effort done in 1996. As of 2000, the industry has continued to change and is still in the conversion from a federally regulated, price-controlled business to an economically dynamic, open industry, and this is a completely revised writing. Changes are continuing to shape the industry differently, especially when coupled with the changes coming from the potential decontrol of the electric power industry. To make even more changes, the impact of ECommerce business-to-business is beginning to play a role in this industry. When this revision was started, only one company offered the web for gas marketing. As of 2000, five additional companies had launched ECommerce business-to-business natural gas trading.

The old natural gas business is really a new business. Its structure goes back 150 years but it is more like a new industry. It has the typical growth and turmoil of a new business. Energy products, especially natural gas and electricity, are new businesses as the country goes into the new millennium. Newly "reformed" companies, new marketing organizations, new systems affecting gas marketing, and even, a new industry structure makes it necessary to start from scratch in writing the revision for this chapter.

Like the new millennium, the natural gas industry and equally as important, the total energy business is going through its own transition. Change will continue as companies and businesses try different strategies. ECommerce will play a major role in the industry's transition. This phase of the transition is amorphous and makes it difficult to predict the exact course of events for the future. Things that appeared far-out years ago are becoming closer to reality. The newest buzzwords, "distributive electricity" includes the use of fuel cells and small dual cycle turbine driven generators by residential and small commercial users. Both of these are becoming economically feasible. The impact on the gas and electric industries is unknown. This is a time of change for the new energy business. Marketing and supplying energy products like natural gas and electricity will go through many changes before optimum conditions are found.

A few things are for sure. Natural gas is becoming the major fuel for stationary power uses in the United States. Long dominated by oil products for this use, now gas is becoming the leader. Coal continues as a major fuel source for electric generation. Consumption of coal for power generation has reached record levels in recent years but environmental concerns and the required high capital for new coal burning generating plants will reduce coal's market share. The public's dislike of nuclear power and the high costs to build plants with the safety desired means no growth for this industry. A new philosophy will have to be developed by society recognizing safety and environmental benefits of atomic power before new nuclear facilities will be built.

The natural gas industry, just like the power industry, which is going through its own decontrol activities, change will be a way of life always. Companies in the energy field and in associated areas such as communications, financial, systems, etc. will continue to merge, acquire, spin off, and change their structure and goals. As the country goes into the new millennium, these are industries in transition and will change along with the growth industries in cyberspace. A big difference from the old, staid and conservative electric and gas utilities of the prior century! Change and growth are the way.

Regardless of this, one factor continues to dominate. The profit motive is still the driving force of the industry today. It will not change but will continue into the future. Economics will govern change and be the basis for decision making. All the transformations—buying and selling of companies, new marketing companies, new systems for handling the merged assets, etc. will all be subject to one metric; is it profitable? Already, some acquisitions made by large electric and gas companies to bring together various parts of the energy industry have come apart because the final economics did not pass muster.

The purpose of this chapter is to give the fuel buyer, for any operations or industry, the knowledge and infor mation needed to buy natural gas for fuel. The buyer may be in a large petrochemical plant where natural gas is a major raw material or may be the commercial user having hundreds of apartments needing gas for heat and hot water or plant operator where the gas is used for process steam. It might be a first time experience or an on-going job for the buyer. This chapter will give the background and information to find natural gas supplies for any need at the lowest cost and highest service and security. The chapter will include information on history of the industry, sources of supply, transportation, distribution, storage, contracts, regulatory, and financial considerations needed to buy natural gas.

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