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Bentek: Gulf-Area Caverns Could be 'Trough Trollers'

Growing gas production from unconventional basins in Texas, Oklahoma and Arkansas as well as the still-anticipated influx of large volumes of liquefied natural gas (LNG) on the Gulf Coast launched aggressive efforts by gas storage developers to expand existing and construct new facilities. Trouble is, according to one consultant, there may be more storage withdrawal capacity than there is pipeline capacity to handle it.

Bentek Energy LLC continues to examine the Southeast/Gulf as part of an ongoing analysis and finds that 31 storage projects planned between 2008-2010, including new fields and expansions, could add more withdrawal capacity than there is available pipeline capacity to move the gas out of the region. If all 31 projects are completed, it would add 305 Bcf of working gas capacity and 17.5 Bcf/d of high-deliverability withdrawal capacity from multi-turn, salt-dome storage.

"During the same time these storage facilities are scheduled for completion, new pipelines will bring incremental domestic production into the Southeast/Gulf region from Texas. New LNG terminals will also add to the rapid build-up of inbound capacity into the region," said Bentek Managing Director Rusty Braziel. "The risk of overbuild will not be defined by excess storage capacity so much as it will be driven by an excess of deliverability within the region. During high withdrawal periods in the winter heating months, storage gas will compete head to head with increasing pipeline deliveries in the region. And, given pipeline constraints on outbound capacity from the area until new construction is completed, we expect to see unprecedented imbalances in regional storage, flows and pricing over the next few years."

Bentek's analysis offers five conclusions:

The analysis is the second part of Bentek's "I of the Storm" series of reports, named for the I-shape of pipeline infrastructure crossing the Southeast. The first part the series looked at Southeast/Gulf Coast pipeline development and found that between now and the middle of next year 40 infrastructure projects in the region will shift gas flow patterns, disrupt regional pricing relationships and realign the value of transportation capacity (see NGI, March 31).

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