Western Hub Eyes Storage Expansion Prospects in California
Increased gas and electricity price/supply volatility is music
to the ears of natural gas storage developers, and no one is
whistling louder these days than two firms sinking their investment
dollars into depleted gas fields in California: Western Canada's
Alberta Energy Company, developer of the state's first merchant
underground storage project, Wild Goose Storage, in a depleted gas
reservoir 50 miles north of Sacramento; and Western Hub Properties,
the Texas-based developer that will begin construction of the
first of two new storage projects in the state by the end of March.
Although delayed in finalizing all of its local permits, Western
Hub will begin construction on its Lodi Storage Project south of
Sacramento by the end of March, according to its California project
manager Jim Fossum. It has selected a location for a similar
project in the southern half of the state, Wheeler Ridge Hub, which
is expected to start construction by the end of 2002 and be
connected with four different transmission pipeline systems.
Following the completion of its most successful open season yet,
garnering long-term four- and five-year contracts for the first
time, Wild Goose's Canadian backer said last Friday that it is
looking at expanding the field and linking it to the Pacific Gas
and Electric Co. backbone transmission pipeline network over the
next three years. Alberta Energy also is taking over storage in
Oklahoma, too, betting that in the heated energy markets storage
might be a preferable alternative to large pipeline expansions.
"We had a reasonably good year for ourselves and our customers,"
said Paul Amirault, Alberta Energy's vice president for business
development. "The open season attracted long-term contracts for as
much capacity as we were comfortable selling and at prices much
better than in previous years. The environment has certainly
translated into an early contracted facility at good prices. Market
area storage is worth something and this market situation in
California could last for some time.
"So I don't think it is any secret that we are evaluating an
expansion at the moment. But it would take some time both for the
regulatory process and for building a 20 to 25-mile pipeline to the
PG&E backbone. That is a more significant endeavor."
Wild Goose, with 14 Bcf of working capacity, 200 MMcf/d
withdrawal and 80MMcf/d injection, currently is only connected
through a relatively small-diameter pipeline to PG&E's local
transmission system. "It provides a constraint on how much gas we
can handle at our facility," Amirault said. "The most likely time
frame to bring that online would be the spring of 2004, although
that could be sped up by taking some risks by pre-ordering
equipment, pipe, etc. We think it is certainly going to be needed,
but the trick is to make sure customers see this as the proper
Amirault said in today's volatile energy markets storage
developers could make a case that their projects are more
economically viable than interstate transmission pipeline
expansions. "We think storage makes a lot more sense than building
a lot more pipe back to supply basins. It gives you better usage of
the existing pipe," he said, adding that in recent years the
PG&E transmission system in northern California, for example,
has averaged only 85% load factor on a year-round basis.
"If you add more storage at the end of those pipes, you can
increase the average load factor by just five percent and get a
whole bunch more customers."
Alberta Energy continues to look for other possible sites in the
western U. S. for developing new storage projects, but it has yet
to find anything better (in California) than expanding Wild Goose
and/or buying existing fields like the 15 Bcf (working capacity)
Manchester Gas Facility in Oklahoma, which Alberta is in the
process of purchasing. "This is an indication that where we can
find an attractive facility, we will step in and buy it," Amirault
Western Hub's facilities are designed as "multi-turn" storage
projects in which a minimum of 500 MMcf/d of gas can be withdrawn
or injected, Fossum said. Lodi is designed for 12 Bcf of working
capacity. The still-to-be-designated and certificated Wheeler Ridge
Hub would have 9 Bcf of working capacity in the first of a
three-phase build up toward 20-25 Bcf capacity, he said.
"It's an easy one from an engineering standpoint, although the
reservoir analysis is still being completed," Fossum said. An
application to state regulatory authorities is expected "in the
next few months," he said. The transmission interconnections
envisioned for Wheeler Ridge Hub include Kern River, Mojave,
PG&E and Southern California Gas pipelines.
Richard Nemec, Los Angeles