For the time being, Mobile, AL-based Bay Gas Storage Co. Ltd. is growing its gas storage business on the back of the load-following needs of gas-fired power generators in Florida and elsewhere in the Southeast. In the future, the company could transform itself to serve the needs of natural gas customers sourcing gas supplies arriving in the eastern Gulf of Mexico and Mobile Bay area.

Currently, about 80% of Bay Gas’ business at its sole McIntosh, AL, storage facility is with power generators, Bay Gas President Greg Welch told NGI. “A large component of our contract portfolio is with electric generation companies… which makes it a warm-weather business where we’re located.” Besides cycling gas in and out of storage over 24 hours to maintain ratable flows, the typical contract offering is for 12-turn service with injections over a 20-day period.

That’s fine for power generators, Welch said. But in the future if the facility is called on to balance LNG importation with market needs, additional horsepower will be necessary to accelerate injections to accommodate LNG imports. “At the end of the day, I think most reasonable people would think that there is a place for supplies in and around the Mobile Bay area and that LNG will play a role there,” Welch said. “To the extent to which they do, we think we’re well positioned as a midstream asset.”

For now, though, the McIntosh facility has plenty of running room serving a gas-fired power generation market that will continue to grow over the next five to seven years, Welch said.

Power generation “certainly has been the underpinning of the fairly rapid expansion of Bay Gas over the lase seven or eight years. We’ve brought on a second cavern and will bring on a third about a year from now, and almost all of that capacity has been subscribed by power generators.”

To continue serving the power generation market, Bay Gas is holding a nonbinding open season for 10 Bcf of capacity at its McIntosh facility. The open season relates to the planned development of two new 5 Bcf high-deliverability caverns together with planned pipeline interconnects with Transco (Station No. 85) and SONAT (York, AL). The new caverns and pipeline interconnects are scheduled to begin service by fall 2009.

Bay Gas now operates two caverns with a total working gas capacity of 6 Bcf with direct interstate pipeline connections to Florida Gas Transmission and Gulf South Pipeline and indirect connects to Destin, Gulf Stream, and Transco pipelines. The third cavern, currently in development, will add an additional 5 Bcf. Existing caverns 1 and 2, are fully subscribed, and cavern 3 reached full subscription well in advance of its expected fall 2007 in-service date, the company said.

“Today, Bay Gas Storage represents over 40% of [parent company] EnergySouth’s earnings,” said EnergySouth Inc. CEO Dean Liollio. “Having reached full subscription in cavern 3 and with the prospect of an additional 10 Bcf from caverns 4 and 5, Bay Gas Storage will be the dominant driver of earnings growth for EnergySouth.”

In May Bay Gas Storage said it reached a multiyear agreement with Progress Energy Florida Inc. to supply storage services to the Florida utility from the Mobile facility (see NGI, May 22). The company said service is expected to begin by summer 2007. Bay Gas Storage announced the plans to add a third storage cavern in November 2005 as a result of a new storage services deal it signed with Tampa Electric Co. (see NGI, Nov. 21, 2005).

“We believe additional market opportunities for salt-dome storage services exist in the mid-south region and along the East Coast, and we plan to establish interconnects with the SONAT and Transco systems as a part of this expansion project,” said Welch. “Our interconnects will be eastern-most of all salt-dome storage in the Southeast and will provide shippers on those pipelines access to over 20 Bcf of high-deliverability storage.”

The open season began Oct. 5 and ends Nov. 3. An expression of interest form can be found on the company’s website and should be faxed by the close of the open season to the attention of David Hayden, vice president of business development at (251) 450-4866. For more information on the open season, contact Hayden, (251) 450-4747 or

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