Underground gas storage is being used in new ways as U.S. storage operators add capacity and develop new services to keep pace with regulatory change, an Energy Information Administration survey shows.
The survey shows gas storage customers still are using available working gas capacity mostly to aggregate market area supplies to serve short term demand swings. But the role of storage in U.S. interstate gas markets generally is expanding as storage customers and service providers adopt more flexible strategies better suited to an unbundled, open access environment (OGJ, Oct. 25, 1993, p. 21).
EIA found that most new uses of U.S. gas storage have cropped up since 1985 when the Federal Energy Regulatory Commission issued Order 436. That evolution is expected to continue under FERC's Order 636, issued in April 1992 and effective last Nov. 1.
Among changes under 636, EIA estimates 80 90% of interstate working gas storage capacity will become available to customers. Storage operators are expected to retain the remaining 10 20% of capacity to manage interstate pipeline systems, balance gas receipts and deliveries, or support other new services allowed under 636.
By comparison, at the beginning of the 1992 93 winter heating season, 42% of interstate pipeline working gas storage capacity was held by pipeline customers, up from 28% in 1987 88.
SIGNIFICANT CHANGES
Perhaps more important than shifting title to U.S. gas Storage capacity, regulatory changes are expected to make interstate gas markets more flexible and more efficient.
Open access, nondiscriminatory interstate gas services allow customers to consider more purchasing, transportation, and storage options. Unbundling allows customers to better evaluate available options.
Growing flexibility on U.S. interstate gas markets is placing a higher premium on storage flexibility. That allows gas purchasers to adjust their marketing strategies to take advantage of price disparities.
As a result, more storage operators are developing salt cavern sites that allow gas movements in and out of storage much faster than underground storage facilities in aquifers or depleted oil or gas fields.
New strategic activities, more capacity, and greater regulatory flexibility are combining to alter seasonal gas storage patterns. For example, gas injections and withdrawals since 198586 have increased year round with more gas injected during winter heating season and more withdrawn in the summer.
Meanwhile, utilization of working gas capacity at the beginning and end of the past two heating seasons - 1991 92 and 1992 93 has declined, in part reflecting better inventory management made possible by the more open, responsive markets for storage services.
FLEXIBILITY INCREASING
Gas storage injection and withdrawal capacities under Order 636 are expected to continue growing faster than working gas capacity.
EIA as of March 1993 counted more than 80 gas storage projects expected to be completed by 2000. Forty new facilities and 26 capacity expansions are to be completed by 1996, adding about 514 bcf of working gas capacity, a 13% increase from yearend 1992 totals. Meantime, U.S. gas deliverability, is projected to grow about 16.2 bcfd, or 26%.
By comparison, U.S. Storage operators from 1990 through 1992 added 51 bcf of working gas storage capacity, a 1% increase. At the same time, storage operators added 2.7 bcfd of deliverability, a 5% increase.
By placing new gas storage facilities near or within ready access to marketing hubs, independent storage operators can compete more effectively with traditional storage operators such as interstate pipeline and local distribution companies.
Independent storage facilities account for only 4% of U.S. working gas capacity, but that share is growing. Independent companies developed 10 of 14 new gas storage sites placed in service from 1989 through 1992, including five salt cavern storage sites in Texas and Louisiana. None of the new storage sites was developed by interstate pipelines.
SALT CAVERNS
Salt cavern storage can be two to three times more costly to develop than aquifer or reservoir gas storage facilities. But salt cavern deliverability rates are comparatively high, base gas requirements low, and storage volumes can be cycled four to six times/year, compared with about once/year for reservoir and aquifer gas storage. And in an emergency, gas can be withdrawn fully from a salt cavern.
More than 73% of new U.S. gas storage capacity during 1993 96 is to be developed in depleted oil or gas reservoirs. Yet such types of facilities account for only 37.2% of announced increases in daily deliverability.
By contrast, new salt cavern storage sites account for only 22% of the expected working gas capacity increase and for more than 61% of new deliverability, EIA said.
Salt cavern working gas Storage capacity in the U.S. by yearend 1996 is expected to reach 159.8 bcf, compared with 46.8 bcf at yearend 1992.
Because salt caverns can provide significant gas marketing flexibility, such facilities account for a growing share of monthly withdrawals - especially during nonheating season.
EIA found that salt cavern withdrawals accounted for only 1 2% of total withdrawals during heating seasons of 1987 92 but accounted for 7% of withdrawals in the nonheating season of 1992. Gas withdrawn from salt caverns in June 1993 accounted for 17% of all withdrawals from storage.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
