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EIA to Report Hike in Nationwide Storage Capacity

The Energy Information Administration (EIA) is due to release a report soon that will show nationwide natural gas storage capacity has risen 100 Bcf or more since last year, but it may not be enough to help producers who, faced with the lowest gas prices in seven years, are looking at the prospect of shutting in their gas.

The report will update last year's EIA analysis, which found that peak storage capacity for all fields in the Lower 48 states was estimated at 3,789 Bcf as of mid-2008, up 86 Bcf from 2007. Taking into account the expected increase of 100 Bcf or more, as reported by The Wall Street Journal, this would likely put current storage capacity at 3.9 Tcf.

EIA economist Angelina LaRose declined to confirm the amount of the expected increase. "The information is not available to the public yet," she said, adding that the report is "in the final level of review" and will be released within a few days to a week.

"A lot of people wouldn't be surprised by that" number (100 Bcf), said Stephen Smith, principal of Stephen Smith Energy Associates. "I thought it had risen more than that...My guess is something approaching 200-300 Bcf [of storage capacity] has been added" in the last year or two. For Smith, the estimate for nationwide storage capacity is a "soft number," he noted.

He believes storage capacity this year will be in the "general neighborhood" of 3.9-4 Tcf. And "it appears we're heading awfully close toward those levels," Smith said. For the week ended Aug. 27, the EIA reported gas storage stocks were 3,258 Bcf, far ahead of the year-ago level (2,742 Bcf) and already at where it should be for the start of the winter heating season (November through end of March).

Gas storage capacity is tightest in the Eastern Region and producing states in the South, according to the EIA.

While there is additional storage capacity, Smith said the usefulness of that capacity to producers will depend on its location. "It doesn't do you any good if you're sitting in Texas and the storage space capacity is in California."

He noted the highest storage level in recent times came on Nov. 2, 2007, when it reached 3,545 Bcf. There was "spare capacity even then...But pockets of capacity were unused for various reasons," including a "mismatch" between where the capacity was located and where it was needed, Smith said. In 2008, the EIA estimated there was approximately 8% spare storage capacity.

In the final analysis, "I don't think it [added storage capacity] makes a lot of difference on the price of natural gas," he said.

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