US utilities invest in shale gas wells as long-term hedges

Physical deals with producers seen as ‘superior’ to financial hedging

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A small but growing number of US utilities are investing in natural gas production to capitalise on the North American shale gas revolution and lock in low prices for years to come, on terms they say are more favourable than they could obtain by using derivatives.

In June, Florida Power & Light (FPL) became the latest utility to pursue such a deal, proposing a plan to partner with Lousiana-based PetroQuest Energy and jointly develop up to 38 gas wells in the Woodford Shale region of Oklahoma. Th