Storage Operators Begin Digging into Base Gas
Storage companies in the Producing Region apparently started digging
into base gas two weeks ago as their working storage levels ran dry, according
to the American Gas Association's report for the week ending March 2. The
report confirmed the predictions of the Energy Information Administration,
which said last week that storage levels will reach record lows this month
and operators may have to dip into base gas to maintain deliveries (see
related story this issue).
The AGA reported a 4 Bcf withdrawal from base gas in the Producing Region
and it separately reported that 6 Bcf of working gas was withdrawn in the
same region during the week. The total withdrawal for the entire country
was 73 Bcf, and storage levels were 24% full with 786 Bcf of working gas.
That compared with 1,157 Bcf at the same time last year and an average of
1,180 Bcf over the past five years.
Some observers suggested operational problems might have prompted a withdrawal
of base gas, which historically was considered sacred by engineers. "I
thought base gas was semi-sacred and not to be touched. It's certainly not
like there was such huge demand last week that operators were forced to
use base," said one marketer.
Rusty Cates of International Gas Consulting said base is "not really
sacred." Base gas has been taken out in Eastern Consuming region in
the past, he said. "CNG [removed some] during cold snaps. Base is amount
needed to maintain pressure needed to maintain desired withdrawals. In many
cases you can continue to take more out without damage to the reservoir.
Aquifer reservoirs are more susceptible to damage from base cuts. Salt caverns
can take base out for short periods with little risk other than creep (salt
moving at certain depths and pressures). I'd hate to speculate on where
One source speculated that "Koch or LRC in Louisiana" might
be responsible for the base gas withdrawal. "They've been putting their
fields out on the fringe lately," the source said. "Bammel also
has been hitting it hard" because Enron is transferring ownership to
AEP and needs to clear the books on the facility, he said.
AGA would not comment on the rumors, but did say two companies were responsible.
"This happens periodically," said AGA's Chris McGill, referring
to the base gas withdrawal. "I think the last time it happened was
in 1997. It's not uncommon for people to take gas out of base gas.
"Some facilities cycle down into base gas as a matter of routine.
In this case we are obviously at a point where nationally we have less in
storage than we've had in previous years. Some companies are fuller than
they were last year, some are less full and some are at zero so they go
into their base gas if they can or if they choose to do that."
He said the reason the 4 Bcf withdrawal was put in a footnote rather
than included into the total withdrawal for the week has to do with AGA's
methodology. "Remember that our report is for working gas in storage.
When a company --- and in this case it was two companies --- reports small
withdrawals from base gas, it's basically reported to us as a negative working
gas number. We need to remove that from our sample.... "If we left
those numbers in our spreadsheet, when we did our extrapolation we would
gross the number up and it would have an impact that it really shouldn't
have going from our sample to the whole."
McGill, who manages AGA's storage report, said despite the current low
level of working gas in storage, he doesn't expect an above average number
of companies to report withdrawals from base gas this year. "I don't
really anticipate seeing it in more companies than is normal or to any significant
quantitative degree," he said. "We're in March so we're coming
into the shoulder period anyway where within a few weeks we are going to
start getting some refills, and these things tend to get filled back in
fairly quickly. It just depends on the facility and what their strategy
is, frankly." Rocco Canonica