Scope/Scale:
Currently, MRM is selling more than 800,000 MMBtu/day of natural gas
sourced from the Gulf of Mexico and Wyoming.
MRM’s royalty position of natural
gas in the Gulf of Mexico totals more than
1.3 Bcf/day with an additional significant royalty position in Wyoming.
Business plans call for the assessment and inclusion, where
warranted, of up to 1.1 Bcf/day of gas to the natural gas sales program.
Business Model:
MRM’s business strategies focus on the producing areas in the Gulf of
Mexico and Wyoming, rather than downstream regions.
MRM is a price taker, seeking
fair market value as expressed by published physical pricing indices in
the production area. MMS
optimizes revenues through leveraging the government’s creditworthiness
and large, ubiquitous volume position. However, MMS does not employ
financial instruments to hedge or otherwise financially backstop
physical transactions.
Gas Sources/Availability:
Current sales involve natural gas sourced on 25 interstate pipelines and
offshore gathering systems in the Gulf, including the following major
systems:
In Wyoming, gas sales are currently sourced from the Madden Field (30,000
MMBtu/day) and the Jonah-Pinedale Field (more than 120,000 MMBtu/day).
Sales Packages:
All packages currently consist of base load and swing load components,
with base load being a best-efforts service obligation and swing
available upon production
capability. MMS includes a
“financial keep-whole” provision to mitigate
price exposure in the rare cases where base load volumes are not
produced. Total volumes per
individual sales packages vary between 5,000 and 60,000 MMBtu/day.
Pricing Options:
Sales are made pursuant to open bidding in Invitations for Offer (IFOs)
published on the MRM web site with a variety of published production
area price indices.
Base load volumes are typically priced at first of month Inside
FERC indices or NYMEX settle prices, while swing volumes are priced at
daily prices quoted by Platt’s Gas Daily.
MMS remains flexible and responsive to gas purchasers’ requests
for consideration of alternative pricing options.
Gas Delivery Points:
Points of delivery
to purchasers of OCS natural gas are typically at offshore platforms and
pooling points with selective sales being delivered to purchasers at onshore
locations. MMS is considering making
more gas sales packages available in the future for sale at onshore pooling
points. Delivery points for sales of
natural gas produced from onshore lands are typically at the terminus of
gathering systems or the tailgate of gas processing plants.
Contract Terms:
General terms and conditions between MMS and purchasers have been those
pursuant to the North American Energy Standards Board (NAESB) standard
contract with special provisions.
Contract terms and volume information specific to individual
sales events are contained within bidding documents (IFOs).
Lastly, transaction confirmations formalize prices accepted at
bidding/sales events and other agreements negotiated within these sales
events.
Length of Contract:
Sales contracts typically cover the 7-month summer cooling season; 5-month
winter heating season; or annual terms.
MMS may consider longer-term
contracts as well.
Business Reputation:
MMS encourages potential new participants in the gas sales program to
contact the more than 25 companies who have participated and continue to
participate in the program (contacts
available upon request). These
companies routinely endorse the MMS gas sales program as being reliable,
flexible, and responsive to gas purchasers’ needs.
For production area purchasers and for end users seeking an
alternative to the higher price volatility of consuming area prices, the
MMS gas sales program is a dependable option in today’s uncertain energy
environment.
The Future: We are excited about the prospects of expanding and extending its gas sales program to the end user community with continued emphasis on a conservative business strategy. For questions contact Mr. Larry Cobb, Acting Manager of the RIK Gas Sales Business Unit,, at 303-231-3307.
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