US Army concerned about price, availability of natural gas

Washington (Platts)--20Mar2007

Concerned that natural gas "may cease to be a viable fuel" because of its
high and volatile price, the US Army will start looking at alternative energy
sources to fuel its installations in the US and around the world, according to
documents Platts has obtained.

"The Army has greatly expanded the use of natural gas over the last
decade," primarily to heat its facilities, the Army's Installation Management
Command said in a memorandum issued earlier this month. "But commodity prices
have increased significantly in recent years and natural gas rates have been
very volatile, putting pressures on strained installation budgets."

Under "current Army assumption[s]," gas may become unaffordable within 25
years, the IMC said. "Other analyses say that better refining technologies and
global natural gas management may decrease the urgency of this crisis for
another 50-plus years."

Regardless, "if our primary assumption is valid, increasing world demand,
no growth in known natural gas reserves and extreme price volatility may
threaten the Army's ability to house, train and deploy soldiers," IMC warned.

According to its web site, IMC's goals are to provide "equitable services
and facilities, optimize resources, sustain the environment and enhance the
well-being of the military community."

In its memo--crafted as a solicitation for contractors to do a study of
the Army's gas needs--the IMC said it wants an in-depth examination that "will
provide a basis for making future decisions on installation energy use and
infrastructure investments to provide reliable, cost-effective utility service
to Army installation missions."

The Defense Energy Support Center, an affiliate of the IMC, said in its
2006 Fact Book that the Army spent $130.2 million on 15.5 million Dt of gas in
fiscal-year 2006. In FY-05, it spent $128.2 million on 16.4 million Dt.

--Rodney White, rodney_white@platts.com