CEC Expert: CA Gas Supply, Price Prospects Upbeat

With the prospect for record supplies in storage and an added almost 400 MMcf/d capacity increase in the south, California's natural gas prospects are distinctly upbeat this summer, compared with a year ago, according to the California Energy Commission's chief natural gas expert watching the industry in the West.

Four separate intra-state transmission expansions by Southern California Gas Co. are proceeding on schedule with a collective capacity boost of 375 to 380 MMcf/d, and the SoCalGas underground storage system "could be full for the first time in its history," according to Bill Wood, state energy commission gas expert, in a telephone interview recently.

In the northern half of the state in Pacific Gas and Electric Co.'s territory a continuing surplus exists on its gas transmission system -- even in the winter months. "The need for PG&E is not quite as acute, compared to SoCal, which has been operating right at its full capacity for a long time," Wood said. "SoCal is operating at full capacity right now just so they can get more gas in storage, putting away 200-800 million-cubic-feet-per-day for the last three or four months."

A lot will depend on weather and the extent of increased electricity demand, but Wood said he doesn't expect price spikes or supply constraints for gas like the state experienced last year and the winter months this year. Demand won't be as great, and the gas pipeline takeaway bottleneck should be eliminated. Next spring will be the time to focus on, he said, noting that if there is an average winter weather, supplies and prices should stay in line.

For SoCalGas, Line 85, Needles, Wheeler Ridge and the Adelanto pipeline expansions are all moving ahead on schedule, said Wood, emphasizing that the work is ongoing simultaneously, with the work the nation's largest gas utility is doing with storage. SoCalGas' Montebello underground storage facility is being abandoned and the cushion gas pulled out; along with efforts to shift cushion gas to working gas at two other existing facilities.

Compared to last year, SoCalGas storage is way ahead now, although Wood cautioned that comparing year-to-year "doesn't always mean a whole lot. When you look at storage, you really want to do what AGA (American Gas Association) is doing -- look back at the average over the past five or six years. What really counts is what happens this winter," he said.

If there is a normal winter, Wood predicts that "things shouldn't be quite so bad next year" in terms of gas and electricity prices and supplies. If the total gas demand, on average drops from 6.5 Bcf/d to 6 Bcf/d, for example, "that can make a tremendous difference" in terms of price volatility for electricity.

"That 500 million-cubic-feet-per-day difference on an average annual basis is huge," Wood said.

When increased overall electricity generation efficiency is factored in from the 1,800 to 2,000 MW of new baseload production coming online this summer, along with the greater in-state gas transmission and storage capacity, Wood said the prospects are very good for bringing stability to California's previously chaotic energy landscape.

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