HomeMy WebLinkAbout09.b. (Handout) Pre-purchase natural gas through a service agreement with Shell Energy7. L.
(Hendoaj)
Natural Gas Purchase Update
Board of Directors Meeting
Craig Mizutani
March 20, 2014
Central Contra Costa Sanitary District
Current Purchasing Authorization
• Natural gas is the largest 0 &M Budget line item
- FY 2013 -2014 = $2.2 M
• District pre - purchases natural gas from Shell
Energy
• General Manager is authorized to pre - purchase
natural gas
- 2 years in advance
- $6 per MMBtu
• This approach has worked well - allows staff to
react to market with checks and balances.
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Historical Prices
AverageShell Energy Natural Gas Price
$10.00
S9.00 --
MOO
$7.00
S&00 ..
$S00 -
S4.00 --
$100
5100
$100
50.00
1
4A 4e 4k e 0 4 P, //
2014 Calendar Year Natural Gas
Purchases
• 2/3 of natural gas pre - purchased at
average of $4.30 per MMBtu
• Remaining 1/3 was to be purchased at
"Spot Market" price
• Shell Energy not able to carry balance for
customers due to supply issues
• Currently purchasing remaining 1/3 at
an "index" price at start of each month
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3/20/2014
2
Factors Affecting Natural Gas Prices
• Supply /Demand
• Weather
• Storage
• Geo- Political Issues
• Financial Market Drivers
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Recent Surge In Natural Gas Prices
• Prices were expected to be stable due to
abundant supply from shale gas
• Weather - "Polar Vortex"
- Cold weather drew down surplus
- Cold affected wells
• Pipeline /Transportation capacity issues
- Some area had to curtail use
- Penalties for imbalance
3/20/2014
3
Current Natural Gas Price
• Recent Spike in Natural Gas Prices
- Day prices up to $23 in February
- "Weekend" price $8.35 in February
- Index price up to $5.60 March
• Current Prices Stabilizing
- $4.90 for 2015
- $4.80 for 2016
Proposed Natural Gas Purchases
• Purchase 2015 natural gas
• Also look at 2016
• Target price to meet FY 2014 -2015
Budget is $4.80 per MMBtu
• Board authorization required to
make next purchase
3/20/2014
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