Canadian trusts fill trading void

Gary Park, Petroleum News Calgary correspondent

Left in the lurch by the collapse of U.S. based energy marketing firms, five Canadian energy trusts have combined forces to market their own natural gas production in eastern Canada and the U.S. Midwest and U.S. Northeast.

With combined output of 750 million cubic feet per day, or about 5 percent of all Canadian output, and backed by reserves of about 2.3 trillion cubic feet, they have formed Energy Trust Marketing to deal directly with utilities, aggregators, power generators and other industrial customers. The five trusts are ARC Energy Trust, Enerplus Resources Fund, PrimeWest Energy Trust, Provident Energy and Shiningbank Energy, which have a combined market capitalization of about C$7 billion, making up the bulk of the trust sector’s market-cap of about C$18 billion.

Brian Soutiere, president of the marketing operation, said the objective is to fill the gap created by the Enron fallout that has seen a host of traders — Dynegy, Williams Energy, El Paso, Reliant Energy, Engage Energy, PG&E Energy Trading, Duke Energy, Aquila and Mirant — either abandon the market or dramatically scale back their operations. He said those departures have reduced liquidity and limited direct access to gas markets.

Soutiere said Energy Trust Marketing also believes there are opportunities to benefit from surplus pipeline capacity downstream of Alberta that has developed over the last 30 months since the Alliance pipeline from northern British Columbia to Chicago came on stream.

Unlike traditional marketing firms, Energy Trust Marketing will contract only for physical delivery of gas directly to the buyer from the seller. By not taking ownership of the gas, it will avoid the financial contracts that toppled Enron and others.

A spokesman for ARC Energy, which produces about 120 million cubic feet per day, said the producers are confident the arrangement will give them a better price for their gas.

The joint venture will also offer its services to other producers, which are eventually expected to contribute about half of the combined volumes.

Energy Trust Marketing is starting with offices in Calgary and Toronto. It plans to operate in all North American markets that are accessible to Western Canadian producers.