The major explosion on the El Paso Natural Gas system in NewMexico last August was a “major shock” to gas supplies in theSouthwest and placed an “extreme burden” on the region’s pipelinenetwork. Although gas prices in southern California soaredtemporarily, “widespread shortages” were avoided due to a”combination of market adjustments,” such as reliance on gas fromstorage, alternate transportation routing and fuel switching, theEnergy Information Administration said last week.

While this suggests a “robustness at least in the short termthat allows markets to avoid the harshest outcomes,” it “is not aguarantee that the current network and supply system [in theSouthwest] is adequate to meet the requirements under allscenarios,” the Department of Energy (DOE) agency said in ananalysis of the impact of the El Paso disruption on western gassupply and pipeline markets.

In fact, “there are signs that during peak-demand periods littleincremental capacity is available to handle increased demandswings,” the EIA said. This is largely due to the fact that therehasn’t been any “significant expansion” of the gas pipeline networkthat transports gas from the Rocky Mountains area, and Permian andSan Juan Basins since 1993, it noted. At the same time, gasconsumption has been growing 4% annually in the region,particularly in California, Arizona and New Mexico.

But the need for greater capacity isn’t just limited to theinterstate pipeline systems, the EIA said. “Expansion of the[Southern California Gas] system, and maybe the Pacific Gas andElectric system that receives supplies in southern California, mayalso be necessary if the state’s natural gas markets continue togrow.”

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