The revamp of domestic natural gas storage reports compiled weekly by the Energy Information Administration (EIA) should be unveiled "any day now," the assistant administrator for Energy Statistics told a Houston audience Tuesday.
EIA's Steve Harvey, a keynote speaker at Energy Metro Desk's Weather & Price Tealeaves II, once was head of energy market oversight for the Federal Energy Regulatory Commission. Since moving to EIA in 2008, Harvey has had a front seat view of the surge in onshore gas production from areas that traditionally hadn't been producing areas, such as the Northeast.
The abundance of gas led EIA this year to begin retooling its weekly reports, which basically would add regions to improve transparency. RBN Energy had reported in June that EIA would split the U.S. inventory data into five regions, from three (see Daily GPI, June 25). It's about time, said Harvey.
"Something is off," he said when asked about market volatility in some regions. "Any day now...we will switch our reporting regions a little bit to get more granularity" and define the regions that "drift together...They will line up better..."
For instance, gas injection figures for the West region have included some Midwest injections. Northeastern injections roll into some injections in the Southeast, and so on.
The proposal to revamp the reports last year drew a lot of feedback. EIA is planning to conduct four tests in October, Harvey said, "where we'll do time releases in the new format in regions, and do that with revisions and other changes..." The traders would be able to test the system before it rolls out.
"That may help a little bit. It will be better geographically aligned," he said. But storage always is going to appear to be more volatile in one particular region in a particular week than another.
"I'll be honest," he said. "There are times when movements in and out of storage are more contractual than market-based. Someone's contract is coming to an end and they can't get the space...There are drivers other than you can see that can have regional effects that impact."
EIA's weekly storage estimates are based on a survey sample that does not include all companies that operate underground storage facilities. EIA selected the sample from the list of storage operators to achieve a target standard error of the working gas storage estimate of up to 5% for each region. Based on a comparison of weekly estimates and monthly data from May 2002 through June 2015, EIA estimated total working gas stocks exhibited an average absolute error of 15 Bcf, or 0.6%.EIA also publishes data for the end-of-month working gas volumes, another estimate of working gas in storage, but there are differences, Harvey said.
The implied differences between the weekly and monthly reports include the difference in respondents -- they can differ because activities don't occur in the schedule implied. The differences historically have tended to be less than 1 Bcf in absolute value. Also, base gas may be reclassified to working gas. The estimation method also may produce estimates for operators not usually sampled that differ from the reported monthly values.
The weekly gas storage report is never 100% accurate, which is a concern for energy traders. EIA has been criticized for the "uncertainty" in the weekly report because of the sample error it uses, which is about 4 Bcf. However, using a sample error has been found to be a better method than collecting data from census, Harvey said.
"If you look at the sample error, it's an error associated with the fact that we don't get data from everyone," he said. "It's about 4 Bcf a week in terms of change...4 Bcf is a really big number...But it's not by any stretch of the imagination the only form of error."
The other type of errors are made by the respondents, which may not, for one reason or another, want to provide information, Harvey said.
"If we simply sampled everyone, we'd get better data, and the sample error would get better, but the respondent error...would likely get worse..." He explained that "when you ask an operator 'what is your inventory,' sometimes they...may give us the same number every week," such as 7 Bcf. "We fight with them for awhile, then we accept 7 Bcf...So we tell them, 'your answer is always 7.'" In response, the next month, the respondent may revise the figure to 8 Bcf to be different.
"This is a fairly typical way to respond to nosy government statisticians, and it's well understood," Harvey said.
EIA samples close to 90% of the operators, big and small, but the smaller operators "are less willing to cooperate, and that's a bit of a problem..."
Information from smaller operators is more incorporated into EIA's monthly storage reports, and what the statisticians have found is, there's not much difference between the weekly and monthly reports.
"This is a huge scale...and it's a good reminder. Every month we get a lot of data that allows us to make sure we're not falling off track...It is a high quality report, and error is inherent...We understand that it doesn't always fit with what you are forecasting," he said to the energy traders in the audience, "and there can be a lot of reasons for that."
EIA "tries to explain the uncertainty" to the marketplace, but "we haven't done as good a job as we should have," Harvey said. "From my perspective, evidence is evidence...We are slowly getting into a good discussion on sample error on documents" because the survey is an economic indicator.
And, he said, the survey is actually a "measurement of what's going on operationally." But that can make customers nervous. The weekly survey "isn't about what is booked, but about what is measured in a day...Trying to get...balance inventories on time, you see the holes. It's very, very tough," but technology is providing an opening to gather better and faster data.
In any case, trying to gather more data always leads to confrontation. "There will be opportunities in the future to get that, but the industry will fight back pretty hard."