Natural Gas Forecast [RE-wrenches]

[Mo Rousso]

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Hi All,

The article pasted below was just published today by Sempra Energy.  Besides
wanting to share this article, can anyone put into perspective for me what
this $ increase may equate to in percentages?

Thanks in advance,
Mo
-- 
Mo Rousso
President
HelioPower, Inc
760.451.9374
www.heliopower.com

Liquefied natural gas:
A critical fuel for California¹s energy future
by Donald E. Felsinger
President and Chief Operating Officer
Sempra Energy 

When the California Public Utilities Commission (CPUC) voted in September
2004 to allow the state¹s utilities to consider liquefied natural gas (LNG)
as part of their resource mix, regulators took a big step forward in helping
California avoid another energy crisis.

That¹s because demand for clean-burning natural gas­which has become
critical to our economy­continues to rise dramatically, while domestic
supplies decline. By 2025, the U.S. Energy Information Administration
estimates natural gas demand will grow by more than 40 percent. Yet, because
of federal restrictions on drilling and exploration, we are facing potential
future shortages and higher prices nationwide.

California uses more than 6 billion cubic feet of gas per day, about 85
percent of which is imported from other states and Canada. Because of this,
California is particularly vulnerable to energy-price spikes.

Costs could rise $200 billion
In fact, today¹s natural gas prices are nearly triple what they were just
five years ago. Over the next two decades, without new natural gas supplies,
energy costs could rise another $30 billion for Californians and $200
billion for all Americans, according to industry studies.

A major driver of natural gas consumption is electricity generation. Most of
the new, efficient power plants being built nationwide are fueled by
clean-burning and environmentally friendly natural gas. In California, as
much as 40 percent of the state¹s gas is consumed by generators, and all of
the major new power plants being built here are gas-fired.

Our manufacturing sector is especially vulnerable. Thousands of jobs in
heavily gas-dependent industries, such as steel, petroleum, chemicals and
food processing, are at risk. Higher energy costs limit companies¹ ability
to compete globally.

There are no easy answers, but gaining access to LNG is vital. A study
recently released by the Manufacturers Alliance/MAPI estimates that the
United States could reduce natural gas prices as much as 25 percent by 2010,
if eight new LNG receipt terminals are built.

LNG is safe
LNG is natural gas chilled to minus 260 degrees Fahrenheit, at which
temperature it turns into a nontoxic, odorless liquid, reduced in volume by
600-to-1. The liquid then gets shipped by special tankers to on- or offshore
terminals, where the liquid is warmed and converted back into gas. There are
vast reserves of natural gas in the Middle East and the Pacific Rim that can
be exported as LNG to meet international demand.

While some critics have questioned the safety of LNG, the industry has an
excellent track record. Over the past 35 years, in excess of 30,000 LNG
shipments have been safely transported over more than 60 million miles.

LNG can be imported to Mexico, California and other parts of the United
States at a cost more than 30 percent lower than current market prices for
domestic gas, but we need new infrastructure to do so. Developing new LNG
receipt facilities, interstate pipelines and gas-storage facilities must be
a national priority.

First new West Coast site
Sempra Energy is building Energía Costa Azul, the first new LNG receipt
terminal on North America¹s West Coast. And, now, thanks to two historic
agreements signed by Sempra Energy LNG in October 2004, we have contracts
for the entire capacity of the plant for the next 20 years.

The first of these agreements was a sales-and-purchase agreement with BP and
its Tangguh LNG partners for the supply of 3.7 million tonnes of liquefied
natural gas (LNG) per year, the equivalent of 500 million cubic feet of
natural gas a day. 

The other was a 20-year agreement with Shell International Gas Limited
(Shell) that provides Shell with half the initial capacity of the Energía
Costa Azul LNG receipt terminal in Baja California, Mexico. The agreement
also gives Shell rights to half of any capacity additions as the project
expands in the future. [Read more about these agreements in this issue of
Performance Report.]

When it begins operating in 2008, this receipt terminal near Ensenada,
Mexico, will be able to process up to 1 billion cubic feet per day of
natural gas. At first, about half of this gas will flow to manufacturing and
power-generation facilities in Baja California. The other half could be
exported to California and other Western states.

Sited at a remote coastal location, this facility will be built to the
highest recognized international standards for health, safety and
environmental compliance. Mexico¹s regulations for LNG facilities are
consistent with those in the United States and, in some areas, even more
stringent. 

Several other companies are interested in developing new LNG receipt
terminals in California, Mexico and the Northwest, but completion of
regulatory reviews and construction could take five years or longer, not
considering additional delays from litigation waged by project opponents.

Lifeblood of our economy
In the 1990s, California was slow to recognize that our energy
infrastructure and supplies needed to keep pace with our growth: No new
major power plants were built during the decade. If we¹ve learned anything
from California's energy crisis of 2000-01, it¹s that energy is the
lifeblood of our economy and that a reluctance to invest in adequate energy
infrastructure will result in disastrous consequences.

 Donald E. Felsinger is President and Chief Operating Officer of Sempra
Energy. Based in San Diego, Sempra Energy is a Fortune 500 energy-services
company with 2003 revenues of $7.9 billion. Sempra Energy serves the largest
customer base of any energy utility in the United States. With nearly 13,000
employees worldwide, the Sempra Energy companies develop energy
infrastructure, operate utilities, and provide related products and services
to more than 10 million customers in the United States, Europe, Canada,
Mexico, South America and Asia. Sempra Energy common shares trade on the New
York Stock Exchange (NYSE) under the symbol "SRE."

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