![](media/image1.jpeg){width="8.75in" height="3.6055555555555556in"}U.S.
DEPARTMENT OF ENERGY

**Office of Energy Assurance**

**ENERGY ASSURANCE DAILY**

###### May 28, 2004

**Electricity**

#### Brief Price Spike in Northeast Electricity Prices On Friday

Real-time hourly prices in southern New York, northern New Jersey and
New England rose to over \$100 per megawatt hour for a couple of hours
in the morning as grid operators reduced capacity on the high voltage
lines while thunderstorms moved across the region. When grid operators
reduce capacity on the transmission lines to avoid problems that could
occur if lightning hits a high voltage line, the operators have use more
expensive local plants to meet the demand, boosting prices. Reuters,
1334 May 28, 2004

**PSEG has Problems During Start-up of N.J. Salem Nuke**\
Public Service Enterprise Group Inc. told the Nuclear Regulatory
Commission on Friday a safety system was blocked when the company tried
to start its 1,150 megawatt Salem 2 nuclear unit in New Jersey. Early
Friday, the unit was still shut, according to a report by the NRC. In an
event report to the NRC, PSEG said the automatic safety injection
function inadvertently blocked. There were no personnel injuries or
radiological occurrences associated with this event, the company said.
The unit has been shut since about May 24 when a small transformer that
feeds power from the switchyard back to the plant failed. PSEG said it
would replace the transformer.
<http://biz.yahoo.com/rc/040528/utilities_pseg_salem_1.html>

**Calif Energy Commission: Electricity Use Up 3.5% 1Q 2004**

Electricity usage in California rose 3.5% during the first three months
of 2004 compared with a year earlier according to the chairman of the
California Energy Commission. The size of the increase led the
Commission to reduce its estimate of excess generation capacity for this
summer from 13% to 12%.

Dow Jones Newswires 05-27-04 1359

<http://pro.energycentral.com/professional/news/power/news_article.cfm?id=4889981>

**Operator at San Onofre, Calif., Nuclear Reactor Fails Drug Test**

A reactor operator at the San Onofre Nuclear Generation Station tested
positive in a random drug test Wednesday.

Southern California Edison, majority owner and operator of the nuclear
power plant, reported to the Nuclear Regulatory Commission that the
operator was found to be under the influence of an unspecified illegal
substance and that his access to all sensitive areas of the plant was
terminated. Ray Golden, Edison\'s on-site spokesman, said the employee
will be disciplined and also will be required to undergo a drug
rehabilitation program and intensified drug screening if and when he is
allowed to return to work. Golden could not say whether the employee
would be allowed to return to his job as a reactor operator. \"It\'s not
certain that this individual will or will not be able to return to the
job,\" Golden said. \"If there are any subsequent positive tests, the
employee would be terminated.\"

North County Times, Escondido, Calif., May 27, 2004

<http://www.energycentral.com/centers/news/daily/article.cfm?aid=4890044>

**Brunswick 1 Nuclear-Power Plant Operating at 68%, Company Says**

Progress energy's 873 Megawatts Brunswick 1 nuclear unit was at 68% this
morning, down from 100% yesterday. The plant reduced power this morning,
but is now gradually increasing power.

Bloomberg, News, 0917 May 28, 2004

**US FERC Chairman Warns California is \'Skating on the Edge\'**

US Federal Energy Regulatory Commission Chairman Pat Wood Thursday told
high-tech industry officials in California that the state is facing
potential power problems this year because of below-normal hydropower
levels, the closing of some generating plants, and the derating of
transmission lines. In remarks to the Silicon Valley Manufacturing
Group\'s energy summit in San Jose, California, Wood warned that the
state \"is skating on the edge\" and said he is concerned over a decline
in California\'s conservation and demand-side management programs and
Southern California\'s exposure to power shortages if imports are below
expected levels. He also highlighted transmission constraints in the San
Diego area that have caused congestion cost to rise sharply. Wood,
however, said he is optimistic that Gov Arnold Schwarzenegger will bring
back \"a broad, action-oriented agenda\" that he said has been absent in
the state since the 2000-2001 power crisis.
[http://www.platts.com/Electric%20Power/News/8944700.xml?S=n](http://www.platts.com/Electric Power/News/8944700.xml?S=n)

**FPL\'s Pa. Marcus Hook Power Plant Nearly Finished**\
Power producer FPL Energy said Friday it was nearing completion of its
744-megawatt Marcus Hook power plant in Pennsylvania. A spokesman at FPL
Energy, Steve Stengel, told Reuters the plant will likely enter
commercial service later this year.
<http://biz.yahoo.com/rc/040528/utilities_fpl_marcushook_1.html>

####### 

**Growth Threatens Capacity for Power**

According to comments by the president of Pinnacle West at the opening
of a new power plant in Las Vegas, the rapid growth in the Southwest
will result in a tightening of the wholesale electricity market sooner
than expected. May 26, 2004 - Las Vegas Review - Journal

<http://pro.energycentral.com/professional/news/power/news_article.cfm?id=4889825>

**BPA: Proposal Seen June 3 On Curbing Fish Spills At Dams**

The Bonneville Power Administration has pushed back by another week --
until June 3, the date it expects to release an amended proposal on
reducing hydropower dam spills for fish recovery this summer, BPA
spokesman Mike Hansen said Thursday. Reducing the fish spill would mean
more available water to generate hydropower this summer.

<http://pro.energycentral.com/professional/news/power/news_article.cfm?id=4889979>

####### Petroleum

#### Motiva La. Refinery Running Despite Bad Gasoline Motiva Enterprises LLC\'s 218,000-barrel-per-day refinery in Norco, Louisiana, was running at normal rates Friday, despite having been pegged as the source of bad gasoline recalled from 600 filling stations, a spokeswoman said. The Norco plant produced gasoline with an elevated sulfur level that has damaged car fuel gauge sensors and led Shell- and Texaco-branded filling stations to shut in New Orleans, Fort Lauderdale, Miami, Tampa, and Sarasota, the company said. \"The refinery is running and at full capacity, but we\'re investigating the cause of this high sulfur,\" the spokeswoman said. [**http://biz.yahoo.com/rc/040528/energy_gasoline_motiva_1.html**](http://biz.yahoo.com/rc/040528/energy_gasoline_motiva_1.html)

#### 

#### Shell Shuts Over 500 Gasoline Stations in LA and FL Before Holiday Weekend Just before the heavy-driving Memorial Day weekend, Shell Oil has stopped the sale of gasoline at more than 500 of its stations in the South because of high levels of sulfur that can ruin vehicle fuel gauges and make an empty tank appear full. The damage done by the bad gasoline could cause some drivers to run out of gas unexpectedly. Also, car owners may have to replace their fuel gauges \-- a repair job that can easily cost \$400 to \$600. The tainted gasoline originated at the Motiva Enterprises refinery in Norco, La., according to Shell. Motiva is the refining arm of Shell in the East and South. As of Friday, 119 Shell and Texaco stations were closed in the New Orleans area, and 400 were not selling fuel in Florida, said Shell spokeswoman Helen Bow. (Shell owns the Texaco brand.) Gas tanks have a float ball that rises and falls with the fuel level. An electrical system reads the float ball\'s level and transmits the information to the dashboard fuel gauge. The system uses silver electrical contacts, which can be quickly corroded by sulfur. The problem came to light this week after drivers began complaining about inaccurate fuel gauge readings. Besides the New Orleans area, problem fuel turned up in shipments to Miami, Tampa, Sarasota and Fort Lauderdale, Shell said. Shell is replacing the gasoline at its stations. But Bow did not have an estimate of when all the stations would be pumping again. Shell said it had received 1,800 queries and 825 claims from people who said their fuel gauges had been affected. Mark Hebert, who lives in Luling, said he filled up at a Shell station on Monday, and 200 miles of driving later, the gauge on his 2002 Impala still read full. [**http://www.motivaenterprises.com**](http://www.motivaenterprises.com/) [**http://www.newsday.com/news/nationworld/wire/sns-ap-sulfur-in-gas,0,4045328.story?coll=sns-ap-nationworld-headlines**](http://www.newsday.com/news/nationworld/wire/sns-ap-sulfur-in-gas,0,4045328.story?coll=sns-ap-nationworld-headlines) [**http://www.platts.com/Oil/News/8064500.xml?S=n**](http://www.platts.com/Oil/News/8064500.xml?S=n) [**http://biz.yahoo.com/rc/040528/energy_gasoline_stations_1.html**](http://biz.yahoo.com/rc/040528/energy_gasoline_stations_1.html)

**Petrochina Announces Nation\'s Largest Oil Discovery in a Decade**

China\'s largest state-owned oil producer, PetroChina, late Thursday
announced the country\'s biggest oil discovery in a decade. PetroChina
Changqing Oilfield, a subsidiary of the PetroChina, found 108.22-mil mt
of proven oil reserves and another 326.99-mil mt of estimated reserves
in the Xifeng oilfield in the northwestern province of Gansu, PetroChina
said. PetroChina started exploration work at the site about three years
ago, a company official said. \"The discovery of a total reserve of
435.21-mil mt of oil at the site is significant to our country\'s fast
industrial growth,\" he said. PetroChina said Xifeng oilfield is capable
of producing 2-mil mt of crude oil per year for at least 15 years.
Meanwhile, PetroChina Changqing Oilfield is currently producing 8-mil
mt/year of crude and 7-bil cu m/year of natural gas and transporting
9-mil mt/year of crude and 6.75-bil cu m/year of natural gas through an
extensive pipeline network.

<http://www.platts.com/Oil/News/7302100.xml?S=n>

[**No Going Back As Indonesia Slips Into
Red**](http://www.energyintel.com/DocumentDetail.asp?document_id=122769)\
With oil prices hovering around \$40 per barrel, now is not the time to
be a net crude oil importer, which is what Indonesia has suddenly
become. But there are strong signals that Indonesia\'s net crude
importing status is structural \-- throwing doubt on official claims
this is \"just a temporary problem\" \-- and imposing a huge, rising
cost in domestic fuel subsidies. Petroleum Intelligence Weekly, May 31,
2004

[**Iraq Exports Return To Normal In Wake Of Basrah
Blast**](http://www.energyintel.com/DocumentDetail.asp?document_id=122762)\
Despite ongoing security problems this month, combined oil exports from
Iraq\'s two Mideast Gulf ports, Basrah and Khor al-Amaya, have averaged
about 1.426 million barrels per day in May so far, according to Energy
Intelligence calculations based on tanker loadings. While combined
exports from the Gulf ports dropped to about 1.1 million b/d after a
pipeline blast earlier this month, those levels have come back to about
1.6 million b/d for the past five or six days, according to sources at
Basrah.

Energy Intelligence Briefing, 1653 GMT May 27, 2004

**[If Oil Supplies Were Disrupted, Then
\...](http://www.nytimes.com/2004/05/28/business/28disrupt.html)**\
New York Times, May 28, 2004    

Natural Gas

**Lehman Sees 10-23% Less U.S. LNG Imports 2004-2007**

Lehman Brothers has revised downward projected imports of liquefied
natural gas into the U.S. for the years 2004 through 2007, a factor that
would be likely to help keep the natural gas market tight.
<http://pro.energycentral.com/professional/news/gas/news_article.cfm?id=4889949>

**LNG Terminals Needed, say CA State Officials**

California\'s use of natural gas is increasing at a rate that will see
the state needing the added supply from as many as three as yet unbuilt
West Coast liquefied natural gas (LNG) terminals, state officials said
at a summit on Thursday, May 27. Joe Desmond, energy advisor to Gov.
Arnold Schwarzenegger, told the energy summit that West Coast LNG
facilities would be the quickest way to boost supplies of natural gas.
\"New pipelines take 10 to 15 years to build,\" he said. In addition to
being a way to tap vast supplies of natural gas in countries where there
is little domestic demand, LNG is currently selling for less than
natural gas being pumped into California from other states**,**
according to Bill Keese, chairman of the California Energy Commission.
There\'s currently debate between California state and federal officials
over who has ultimate authority to approve the sites for LNG facilities.
LNG plants have come under fire local residents because of concerns over
the safety of the volatility of LNG and the possibility of cat
explosion. May 27, Silicon Valley/San Jose Business Journal (CA)\
[http://sanjose.bizjournals.com/sanjose/stories/2004/05/24/da
ily36.html](http://sanjose.bizjournals.com/sanjose/stories/2004/05/24/daily36.html)

**ConocoPhillips Plans LNG Terminal in Gulf of Mexico** ConocoPhillips,
the third-largest U.S. oil company, is seeking to build an offshore
liquefied-natural-gas terminal in the Gulf of Mexico, joining other
companies hoping to profit from waning domestic gas reserves. The
proposed Compass Port facility, with a capacity to handle 1 billion
cubic feet of gas a day, would be located about 15 miles off the coast
of Alabama, ConocoPhillips spokeswoman Linsi Crain said in an interview.
At least 30 proposals have been made for construction of U.S. terminals
for LNG. Construction of the Compass Port project might begin next year
if it wins regulatory approval and take about three years to complete,
ConocoPhillips said in an e-mailed statement. ConocoPhillips plans to
build 32 miles of pipelines to connect the terminal with three lines at
Coden, Alabama, Crain said. Bloomberg News, 1622 May 28, 2004

**FERC Issues Freeport LNG Final Environmental Impact Statement**
Contango Oil & Gas Company reported today that the Federal Energy
Regulatory Commission (\"FERC\") issued the Final Environmental Impact
Statement (\"FEIS\") for Freeport Development LNG L.P.\'s (\"Freeport
LNG\") liquefied natural gas receiving terminal and natural gas
pipeline. Contango holds a 10% limited partnership interest in Freeport
LNG. The FERC staff concluded that approval of the Freeport LNG project,
with appropriate mitigating measures as recommended, would have limited
adverse environmental impact. Freeport LNG expects construction of the
facility to begin before year-end and for it to be in service during the
second half of 2007. [www.contango.com](http://www.contango.com/)
<http://biz.yahoo.com/bw/040528/285390_1.html>

####### Other

Nothing to report.

**Energy Prices**

+-------------------------------+-----------+-----------+------------+
|                               | **Latest  | **Week    | **Year     |
|                               | (5        | Ago**     | Ago**      |
|                               | /28/04)** |           |            |
+-------------------------------+-----------+-----------+------------+
| **CRUDE OIL**                 | 39.90     | 39.83     | 28.46      |
|                               |           |           |            |
| **West Texas Intermediate     |           |           |            |
| US**                          |           |           |            |
|                               |           |           |            |
| \$/Barrel                     |           |           |            |
+-------------------------------+-----------+-----------+------------+
| **NATURAL GAS**               | 6.45      | 6.35      | 5.71       |
|                               |           |           |            |
| **Henry Hub**                 |           |           |            |
|                               |           |           |            |
| \$/Million Btu                |           |           |            |
+-------------------------------+-----------+-----------+------------+

> Source: Reuters

**This Week in Petroleum** from the Energy Information Administration
(EIA)

[*http://tonto.eia.doe.gov/oog/info/twip/twip.asp*](http://tonto.eia.doe.gov/oog/info/twip/twip.asp)

Updated on Wednesdays

**Weekly Petroleum Status Report** from EIA**\
**[*http://www.eia.doe.gov/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/wpsr.html*](http://www.eia.doe.gov/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/wpsr.html)

Updated after 1:00pm (Eastern time) on Wednesdays

**Natural Gas Weekly Update** from EIA

[*http://tonto.eia.doe.gov/oog/info/ngw/ngupdate.asp*](http://tonto.eia.doe.gov/oog/info/ngw/ngupdate.asp)

Updated after 2:00 pm (Eastern time) on Thursdays