Storage statistics show the industry is heavily into squirrelingaway its nuts for the winter. Some traders watching robust storageinjections have questioned the validity of AGA-reported figures,but storage operators say, “Yes, Virginia, there really is thatmuch gas in the ground.”

Compared to last year at this time, National Fuel Gas is about12.7 Bcf ahead on storage injections, said Jim Delaney, manager ofgas planning. At the end of June, National fuel had 131.2 Bcf instorage, compared to 118.5 Bcf at the end of June 1997, Delaneysaid. He attributed the rise in storage over last year to lastwinter’s warmer-than-normal temperatures. “This is atypical in thatwe’ve got so much gas in storage.”

That view isn’t necessarily shared by all. “If anything, I wouldsay this is a more normal injection season compared to last year,”said Pete Kinsella, vice president of marketing and volumemanagement for Columbia Gas Transmission. “When you start comparingto last year, prices were higher than what our storage customershad seen in the ’96 summer. I think there was an expectation thatprices were going to drop as the summer went on, so customers wereholding back on storage injections in 1997.”

At the end of this month, Kinsella said he expects his companyto be about 72% full of working gas. That’s about 10% higher thanthe same time last year. By the end of August, look for ColumbiaGas Transmission storage to be about 86% full, he said. Lookingahead, that’s a good thing. “If you have big power generationmarket demand that takes gas that otherwise might be injected intostorage, that’s not a problem [with high storage levels]. We alsohave some construction planned on our system at the end of theyear. It’s going to make that a lot easier because customers aregoing to have the majority of their gas in storage by the end ofAugust.”

End-users might not be the beneficiaries of the storageabundance, Delaney speculated. He pointed out prices this summerare lower than last summer. With storage filling up fast, buyersmight not be able to take advantage of the relatively low pricesbecause they can’t get the gas into the ground. Storage contractsspecify that as caverns fill up, injections must slow down, hesaid. Delaney said National Fuel doesn’t anticipate any operationalproblems with getting gas into the ground, but it could happen tosome other LDCs and pipelines. “I would say the pipelines are in aposition where it’s more and more difficult to handle these typesof volumes. Because the pipelines are having difficulty handlingthe gas, there are more opportunities to take advantage ofmarkets.” Delaney said this has happened several times to thebenefit of National Fuel and its customers where prices weredepressed because there was nowhere for gas to go.

Kent Miller, director of storage management for Enron’s NorthernNatural Gas, said he expects strong injections to continue. “Rightnow, we’re seeing such strong spreads summer to winter that we havea full expectation that everyone will take advantage of thatarbitrage opportunity.” He said Northern Natural is about 50% fullcurrently versus 40% or so this time last year. “I don’t think it’ssurprising. We expected to be heavily injected. We’re probably notas far ahead on storage as the rest of the nation. We’re not atthat level yet, but we certainly do expect to be completely filledat the end of the injection season.”

Williams Gas Pipelines Central, formerly Williams Natural Gas,is 5 to 5.5 Bcf ahead of last year’s fill level, said spokesman TimThuston. At the end of June, Williams Central had just under 29 Bcfof working gas in the ground. He said July injections shouldaverage about 175 MMcf/d. So far this month, Williams Central hasinjected about 2 Bcf, about half of the typical July injection todate of about 4 Bcf. “So we’ve slowed down in July.” The slow-downcomes from greater gas demand for cogeneration as well as theshut-down of Amoco’s large Hugoton Jayhawk processing plant.

An ANR Pipeline spokesman said the company has 39 Bcf more inthe ground than at this time last year. “We are currently at aboutthe same level as we were on Sept. 1 of last year, and we’re aboutsix weeks ahead of a typical injection schedule. Due to the El Ninoeffect, we came out of last winter with a high balance at the endof March.”

Similar to some traders questioning the AGA storage figures,Kinsella said he’s wondered in the past about how storage operatorsreport levels to AGA, whether they’re all being consistent in justreporting working gas. “I just wonder if everyone is talking thesame language when they provide information to AGA.”

Not to worry, said Christopher McGill, AGA’s director of gassupply. “To the best of my knowledge, everybody that isparticipating in our survey understands clearly what we are askingfor and provides us with compatible information. That is, what onecompany reports to us is what another company reports to us, andthat is working gas.”

So, is this year really out of the ordinary? “I don’t thinkthere’s been an ordinary year since we started doing the storagestatistics,” McGill said. “With respect to the inventoriescurrently, they’re significantly ahead of last year, of course. Whyis that? In my mind it has to be because. I’m not exactly sure whyit is, quite frankly. There’s either a strategic reason to have gasin storage early for the companies, or there’s an economicincentive. I’m assuming that both of those things are in play.”

The first full refill season for which AGA reported numbers,storage was refilled to within 97% of full, McGill said. “Thatwould have been on or about November of 1994. Since then, leadinginto the winter heating season, storage has been 88% to 92% full.That’s the history. What’s going to happen this year? Obviously thestorage refill is on a pace to come in higher than 92%, approachingthat 97% refill.”

Joe Fisher, Houston

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