El Paso Corp. (ticker: EP, exchange: New York Stock Exchange (.N))
News Release -
Market Behavior Refutes Allegations of Price Manipulation in California
HOUSTON, TEXAS, June 26, 2001—The recent behavior of
natural gas prices proves that supply constraints in California are the reason
that California natural gas prices are higher than elsewhere in the United
States. "Simply put, the demand for natural gas in California has exceeded
the available supply, resulting in higher prices in California," said Norma
F. Dunn, senior vice president of Communications and Government Affairs for
El Paso Corporation (NYSE:EPG).
The price of natural gas across the United States is at a six-month low.
Current natural gas prices at Henry Hub, which is the benchmark for natural gas
pricing in North America, have dropped from $10.00 to $3.45 per million British
thermal units (MMBtu)-a decrease of roughly 66 percent-over the last six months.
Reduction in demand and increases in supply, along with moderating weather
nationwide, have led to this decrease in prices.
While natural gas prices have also fallen in California, they are still
significantly higher than in the rest of the United States. "This is
because a natural gas supply/demand imbalance still exists in California not, as
some have argued, because of transportation agreements on the El Paso Natural
Gas pipeline system," said Dunn. "In fact, in June 2000 when El Paso
Merchant Energy held transportation rights on the El Paso Natural Gas system,
the natural gas price differential between Texas and New Mexico producing
regions and California was $0.27-only five percent of what it is today (see
table below), even though today El Paso Merchant Energy's capacity rights have
been resold to some 30 shippers."
"We are pleased that California, along with the rest of the country, has
received some recent price relief; however, it is important to understand that
reduced daily demand for natural gas in California has caused these lower
prices," Dunn continued.
Several factors have contributed to a reduction in demand for natural gas in
California in the past month. First, there is more electricity available from
non-gas-fired electric generation, such as nuclear and hydroelectric facilities.
This has decreased the need for fuel for gas-fired plants. Second, energy
conservation efforts statewide have caused an overall decrease in the demand for
power, resulting in a decrease in demand for natural gas. Third, natural gas
storage facilities across the country are refilling at a rapid pace, which has
had a downward impact on natural gas prices.
"While reduced prices for natural gas may make it seem that the
California market has come back into balance, in actuality, it has not. A
comparison of natural gas prices between California and a comparable market such
as New York indicates that prices remain high in California relative to the rest
of the country due to a continuing imbalance between supply and demand. Although
demand for natural gas has decreased, demand is still higher than available
natural gas supply, primarily because the state does not have sufficient
pipeline infrastructure to serve its needs," Dunn concluded.
El Paso Corporation is committed to meeting energy needs throughout North
America and the world with operations that span the energy value chain from
wellhead to electron. The company is focused on speeding the development of new
technologies, such as clean coal and liquefied natural gas, to address critical
energy shortages across the globe. Visit El Paso at www.elpaso.com.
NATURAL GAS PRICES ($/MMBTU DRY)
SoCal Border and PG&E South pricing points)
|(Transco Z-6 NY)
Region to California Border
of EPNG Permian Basin, EPNG San Juan, and Transwestern Permian)
Region to New York
Region to Chicago
of NGPL-MidCont., ANR-Oklahoma, and NNG-TX, OK, KS)
Prices and differentials are based on First-of-Month average
* Average of Natural Gas Intelligence and Inside FERC data.
** Natural Gas Intelligence index
All other prices from Platt's Gas Market Report (Inside FERC)
This release includes forward-looking statements and projections, made
in reliance on the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The company has made every reasonable effort to ensure that
the information and assumptions on which these statements and projections are
based are current, reasonable, and complete. However, a variety of factors could
cause actual results to differ materially from the projections, anticipated
results or other expectations expressed in this release. While the company makes
these statements and projections in good faith, neither the company nor its
management can guarantee that the anticipated future results will be achieved.
Reference should be made to the company's (and its affiliates') Securities and
Exchange Commission filings for additional important factors that may affect