AGA Storage Revision Shows Industry Reached New Peak in '98

It was a week late, but the American Gas Association reported last week that the industry put more gas in storage this year than in any of the previous four years in which it has been conducting its storage survey. In a revision prompted by a change in total working gas capacity in the U.S., the AGA said on Nov. 6 there was 3,127 Bcf of gas in storage, which is 58 Bcf more than the previous peak set on Nov. 8, 1994 (See survey this issue).

The report sent out a confusing market signal last week, however, by reporting 45 Bcf of withdrawals for the week ending Nov. 13 but actually showing 12 Bcf more gas in storage than was reported in the previous weekly survey. The association was forced to correct the previous week's working gas levels, moving them up 57 Bcf to the 3,127 Bcf peak, to show an understandable comparison between the last two weeks.

The peculiar alterations, the association said, were the end result of a significant increase in working gas capacity reported by 20 of the more than 40 companies included in the AGA survey. AGA showed a 58 Bcf increase in total working gas capacity in the country. The new estimated full level is 3,248 Bcf, which includes a 29 Bcf increase in working gas capacity in the Producing Region, a 21 Bcf rise in the Consuming Region East and an 8 Bcf increase in the Consuming Region West.

"The ceiling changes. The percent full of our sample stays the same. And when you adjust the ceiling it adjusts the [working gas] numbers and creates a temporary discontinuity, but that's a quirk of our methodology," said AGA's Chris McGill.

McGill downplayed the significance of the change. "As you know we periodically readjust our universe of what it is we extrapolate our sample to - how we define storage. People may add facilities, they may delete facilities, they may improve facilities and over time we get to a point where we need to adjust how we view our universe and this is our time to do it. [The changes have] been building over time but we don't adjust our universe of storage frivolously, and we don't do it every week. We do it at one time. This may be the fourth or fifth time we've done this in the history of our report." It is the largest adjustment that has been made, he conceded.

"To me it's no more significant than if a company added a facility." A number of companies, including Columbia Gas, have invested in expanding their storage facilities this year to improve deliverability. "That might be part of it," McGill said. "Maybe the traditional view of the line between working gas and base gas has shifted a little bit for some of the companies. Maybe they're finding that they can just get a little more in their facilities than they have before." As storage companies fill facilities to higher levels they discover more about the capabilities of their fields, he noted.

Some observers concluded the changes sent out a bearish signal because they establish a new five-year high for working gas and show 332 Bcf more gas is in storage than there was at the same point last year. Many sources admitted confusion over the changes. Some ignored the revision of the prior week's numbers and focused on the relatively large withdrawal.

"The market seems to have looked past the bearish implications of the change in working gas capacity to focus solely on the withdrawal figure," said one gas trader. "And on a net-net basis, the 45 Bcf drawdown was a little larger-and therefore bullish-than most were expecting considering the mild weather and relatively low prices prevalent in the cash market."

Rocco Canonica

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