Aquila, partner to buy California gas storage field

Energy merchant Aquila Inc. and ArcLight Energy Partners Fund I LP Thursday said they will jointly purchase for $220 million a company that is building a natural gas storage facility in energy-short northern California. The Lodi project, scheduled to be completed in December, will store 12 bcf of natural gas.

By the OGJ Online Staff

HOUSTON, Aug. 23 -- Energy merchant Aquila Inc. and ArcLight Energy Partners Fund I LP Thursday said they will jointly purchase for $220 million a company that is building a natural gas storage facility in energy-short northern California.

Western Hub Properties, LLC, Houston, owns the Lodi gas storage facility, one of two merchant storage facilities in the state. Aquila CEO Keith Stamm said the facility will help meet demand as gas-fired power plants come on line in 2002 and 2003.

The Lodi project, scheduled to be completed in December, will store 12 bcf of natural gas with a planned injection rate of 400 MMcfd and withdrawal rate of 500 MMcfd. As a result, the facility will be able to cycle its inventory up to six times/year, compared to cycling rates of 1-2 times/year for most existing storage facilities.

In January, independent power producer Calpine Corp., San Jose, Calif., said it had entered into a long-term firm agreement for daily deliverability at Lodi equal to about 20% of its western region peak day gas requirements in 2002.

An Aquila spokesman said the company will follow a "conservative" strategy with respect to the politically charged atmosphere in California surrounding energy issues, noting the company previously pulled out of the state when it became apparent "people were paying more for power than they could sell it."

California is still trying to sort out how to deal with the aftermath of electricity price spikes that left one of the state's largest utilities in bankruptcy protection and another waiting for a government bailout.

Kansas City, Mo.-based Aquila also owns a 27.2 bcf storage facility in Katy, Tex., which it purchased in 1999. A spokesman said the company plans to boost the number of turns at the facility to three from one by drilling an additional three wells.

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