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Progress Energy Florida Deal Seals Bay Gas Storage Expansion

EnergySouth subsidiary Bay Gas Storage Co. Ltd. said Friday it has reached a multiyear agreement with Progress Energy Florida Inc. to supply natural gas storage services to the Florida utility from its Mobile, AL, storage facility. Storage expansion couldn't be a more timely issue as the nation's capacity for natural gas stocks continues to be filled at a record pace. With the injection season only a couple of weeks old, working gas in storage already stands at 2.08 Tcf.

Bay Gas Storage said service is expected to begin by the summer of 2007 as the company completes a major expansion of its facilities that include the development of a third cavern and associated surface facilities that will double the company's existing natural gas storage capacity. The company announced the plans to add a third storage cavern in November 2005 as a result of a new storage services deal it signed with Tampa Electric Co. (see NGI, Nov. 21, 2005).

"Interest in service at Bay Gas Storage has been brisk, and we're delighted to have Progress Energy Florida as our newest customer," said Greg Welch, president of Bay Gas Storage. "As we near full subscription of our third cavern, planning is underway for our next expansion," Welch added.

Bay Gas Storage spokesman Wes Phillips said expanding storage capacity is a win-win scenario no matter what the market is doing. "The industry really saw a three-month swing where we seemed to have shortfalls and trouble meeting natural gas demand over the winter to now, where storage is at record levels and supply is plentiful," he said. "Looking at storage filling up, the common perspective is to call for more storage capacity, which would favor Bay Gas. During the winter period, where there were shortfalls of gas, people want to park some gas in storage to ensure they can meet demand, which is also beneficial to the company."

Focusing on the natural gas market today, Phillips said the argument could be made that there is a need for more storage. "Right now, if you are a customer and you are looking at storage with current market prices down, you would want to put as much gas in storage as possible," he said. "When prices are low, people want to park gas in storage to take advantage. When prices are high, people still want to use storage in order to mitigate some of the volatility of index prices."

Bay Gas Storage currently operates two salt-dome natural gas storage caverns at its storage facility located about 40 miles north of Mobile. The company has direct pipeline interconnects with Florida Gas Transmission Company, Gulf South Pipeline and Mobile Gas Service Corp.

Bay Gas Storage's two existing caverns have a combined working-gas capacity of approximately 6 Bcf with injection and withdrawal capacities of 200 MMcf/d and 610 MMcf/d, respectively, and are currently fully subscribed on a firm basis. The third cavern expansion will add approximately 5 Bcf of working-gas capacity along with injection and withdrawal capacities of 250 MMcf/d and 600 MMcf/d, respectively.

Raleigh, NC-based Progress Energy Florida serves 1.5 million customers in northern and central Florida.

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