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
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
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