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Summertime: Injections Pumping And Storage Is High

Summertime: Injections Pumping And Storage Is High

Storage statistics show the industry is heavily into squirreling away its nuts for the winter. Some traders watching robust storage injections have questioned the validity of AGA-reported figures, but storage operators say, "Yes, Virginia, there really is that much gas in the ground."

Compared to last year at this time, National Fuel Gas is about 12.7 Bcf ahead on storage injections, said Jim Delaney, manager of gas planning. At the end of June, National fuel had 131.2 Bcf in storage, compared to 118.5 Bcf at the end of June 1997, Delaney said. He attributed the rise in storage over last year to last winter's warmer-than-normal temperatures. "This is atypical in that we've got so much gas in storage."

That view isn't necessarily shared by all. "If anything, I would say this is a more normal injection season compared to last year," said Pete Kinsella, vice president of marketing and volume management for Columbia Gas Transmission. "When you start comparing to last year, prices were higher than what our storage customers had seen in the '96 summer. I think there was an expectation that prices were going to drop as the summer went on, so customers were holding back on storage injections in 1997."

At the end of this month, Kinsella said he expects his company to be about 72% full of working gas. That's about 10% higher than the same time last year. By the end of August, look for Columbia Gas Transmission storage to be about 86% full, he said. Looking ahead, that's a good thing. "If you have big power generation market demand that takes gas that otherwise might be injected into storage, that's not a problem [with high storage levels]. We also have some construction planned on our system at the end of the year. It's going to make that a lot easier because customers are going to have the majority of their gas in storage by the end of August."

End-users might not be the beneficiaries of the storage abundance, Delaney speculated. He pointed out prices this summer are lower than last summer. With storage filling up fast, buyers might not be able to take advantage of the relatively low prices because they can't get the gas into the ground. Storage contracts specify that as caverns fill up, injections must slow down, he said. Delaney said National Fuel doesn't anticipate any operational problems with getting gas into the ground, but it could happen to some other LDCs and pipelines. "I would say the pipelines are in a position where it's more and more difficult to handle these types of volumes. Because the pipelines are having difficulty handling the gas, there are more opportunities to take advantage of markets." Delaney said this has happened several times to the benefit of National Fuel and its customers where prices were depressed because there was nowhere for gas to go.

Kent Miller, director of storage management for Enron's Northern Natural Gas, said he expects strong injections to continue. "Right now, we're seeing such strong spreads summer to winter that we have a full expectation that everyone will take advantage of that arbitrage opportunity." He said Northern Natural is about 50% full currently versus 40% or so this time last year. "I don't think it's surprising. We expected to be heavily injected. We're probably not as far ahead on storage as the rest of the nation. We're not at that level yet, but we certainly do expect to be completely filled at the end of the injection season."

Williams Gas Pipelines Central, formerly Williams Natural Gas, is 5 to 5.5 Bcf ahead of last year's fill level, said spokesman Tim Thuston. At the end of June, Williams Central had just under 29 Bcf of working gas in the ground. He said July injections should average about 175 MMcf/d. So far this month, Williams Central has injected about 2 Bcf, about half of the typical July injection to date of about 4 Bcf. "So we've slowed down in July." The slow-down comes from greater gas demand for cogeneration as well as the shut-down of Amoco's large Hugoton Jayhawk processing plant.

An ANR Pipeline spokesman said the company has 39 Bcf more in the ground than at this time last year. "We are currently at about the same level as we were on Sept. 1 of last year, and we're about six weeks ahead of a typical injection schedule. Due to the El Nino effect, we came out of last winter with a high balance at the end of March."

Similar to some traders questioning the AGA storage figures, Kinsella said he's wondered in the past about how storage operators report levels to AGA, whether they're all being consistent in just reporting working gas. "I just wonder if everyone is talking the same language when they provide information to AGA."

Not to worry, said Christopher McGill, AGA's director of gas supply. "To the best of my knowledge, everybody that is participating in our survey understands clearly what we are asking for and provides us with compatible information. That is, what one company reports to us is what another company reports to us, and that is working gas."

So, is this year really out of the ordinary? "I don't think there's been an ordinary year since we started doing the storage statistics," McGill said. "With respect to the inventories currently, they're significantly ahead of last year, of course. Why is that? In my mind it has to be because. I'm not exactly sure why it is, quite frankly. There's either a strategic reason to have gas in storage early for the companies, or there's an economic incentive. I'm assuming that both of those things are in play."

The first full refill season for which AGA reported numbers, storage was refilled to within 97% of full, McGill said. "That would have been on or about November of 1994. Since then, leading into the winter heating season, storage has been 88% to 92% full. That's the history. What's going to happen this year? Obviously the storage refill is on a pace to come in higher than 92%, approaching that 97% refill."

Joe Fisher, Houston

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