The amount of working gas in storage at the end of the winterheating season (March 31) will be at a record low, according to anew report by the Energy Information Administration (EIA). In fact,some operators may be forced to dip into their base gas inventoriesto maintain facilities.

“Regardless of how the rest of the 2000-2001 heating seasonplays out, remaining working gas inventories on March 31, 2001 arelikely to approach record lows and remain at low levels through thefirst several months of the refill season,” the Department ofEnergy (DOE) agency said in a report on the current status andnear-term outlook for storage inventories in the United States.

Specifically, the EIA predicts storage stocks of working gaswould drop to 624 Bcf by the end of this month, assumingwithdrawals continue at the average rate of the past five heatingseasons. But if withdrawals are higher than average, they couldfall to as low as 461 Bcf, it warns.

The American Gas Association (AGA) last Wednesday reported that73 Bcf of working gas was withdrawn for the week ending March 2,which places the current level of working gas stocks nationwide atapproximately 785 Bcf.

The historical low for working gas storage was recorded at theend of the 1995-96 heating season. The EIA reported at the timethat U.S. gas stocks fell to 758 Bcf, while the AGA put the leveleven lower – at 546 Bcf.

“Even with higher-than-average withdrawal rates through the restof [this] heating season, storage stocks are expected to beadequate to meet demand,” the agency noted in its report. However,this prognosis does not take into the account the cold weather andsnowstorms that gripped the Northeast and New England regions lastweek.

On a regional basis, the EIA predicts the 280 storage siteslocated in the Eastern Consuming Region will have a total of 351Bcf in inventory by the end of March, which is 225 Bcf less thanthe region’s five-year average stock level; the Western ConsumingRegion (37 sites) will end the season with about 76 Bcf, or 126 Bcfbelow average; and the Producing Region (98 storage sites) willhave 197 Bcf remaining, or 164 Bcf below its five-year average. Theestimates assume March withdrawals from storage will be on par withthe five-year average rate.

The remaining gas stocks in the Eastern Consuming and ProducingRegions at the end of March will be near the record low levels setat the end of the 1995-96 heating season, the EIA said. The gasstorage levels in the West already are below the record low of 151Bcf.

Despite the bleak numbers, “there is little likelihood thatworking gas levels for the regions will be completely drawn down”at the end of March, the agency said. “Nevertheless, working gasinventories at some sites could drop so far that operators wouldneed to dip into base gas inventories to maintain operations.”

It estimates the industry will have to inject about 10 Bcf/d for214 days to refill storage levels sufficiently for the next winterheating season. This compares to an injection rate of 7.6 Bcf/d forthe same period last year.

As operators scrape the bottom of their storage facilities tosatisfy high demand, the EIA predicts there will be intensifiedcompetition during the upcoming April-October period between gassupply for storage injections and gas to satisfy baseloadconsumption. This will put upward pressure on prices, which, inturn, could result in less gas going into storage for next winter,the agency cautioned.

“The heavy demand for natural gas to refill depleted storageinventories between April and October 2001 will vie with baseloadrequirements to a greater degree than in previous years. Hotweather and renewed economic strength would both add to demand.This heightened competition for supplies should place some upwardpressure on price levels,” which in the end “could dampen refillactivity” for the winter heating season of 2001-2002, the EIA said.

Although gas prices have been moderating, the EIA anticipatesthat prices during the 2001 storage refill season will exceed theaverage price level of the 2000 refill season.

While the upcoming refill period “could resemble that of lastyear’s” in many respects, the agency noted “several favorablefactors” could improve the situation: increased U.S. gasproduction, more Canadian gas imports, a decline in prices from thepeak levels in early 2001, and decreased demand by industrial gasusers due to higher prices.

Susan Parker

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