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GRI: Storage Will Grow by Leaps and Bounds
Regulatory changes and steady growth in U.S. natural gasconsumption will trigger a 21% increase in storage capacity overthe next 15 years, according to a new study of gas storage by theGas Research Institute.
The study, titled Natural Gas Storage Overview in a ChangingMarket Environment, estimates lower 48 working gas storage capacitywill grow from 3.8 Tcf in 1998 to 4.6 Tcf in 2015. The addedstorage capacity will require a gas industry investment of nearly$5 billion (1998 dollars), or about $270 million per year. About75% of the capacity additions are expected to occur after 2005 asgas demand grows more rapidly than storage capacity requirementsduring the next five years. GRI projects the nation’s gas demandwill increase 50%, from 21.3 Tcf in 1998 to 32.8 Tcf in 2015.
The study, conducted for GRI by Energy and EnvironmentalAnalysis Inc., Arlington, VA, identifies several trends that willdrive future storage requirements, including the damping impact onseasonal volatility of increasing consumption by power generationand industrial markets, increases in the value of market-areastorage, and the restructuring of pipeline and storage regulations.
GRI see storage services becoming more efficient as a result oflocal distribution company restructuring. Contrary to the LDCoperators of the past, new storage operators are expected to havemore of a direct profit motive to maximize the value of storage andare likely to offer new services that use existing facilities moreeffectively.
“These trends are already beginning to have a major impact ongas storage operations and will only be magnified in the future,”said John Cochener, GRI project manager and principal analyst —resource evaluation.
Included is an analysis of changes in storage capacity,services, customer usage patterns and costs, as well as proposedstorage projects. LNG and Propane-Air are covered in addition totraditional types of storage facilities. The study also reviewsfuture storage requirements, costs associated with expandingdifferent types of storage capacity, and the merits of differentstorage locations.
The study also looks at storage capacity under existingcontracts. One finding is that the average length of time untilcontract expiration for firm storage contracts has declined from6.8 years in 1996 to 6.2 years in 1999. More than half of theexisting contracts in spring 1999 will expire by 2004. By 2006, 70%existing contracts will have expired. Further, storage operatorswill generally be replacing storage contracts negotiated by localdistribution companies (with guaranteed rates of return) withcontracts negotiated by the growing ranks of gas marketers, who areunder competitive pressure to hold down costs.
The number of years remaining under existing storage contractsvaries by customer type, according to the study. Currently,cogenerators and independent power producers have the longestremaining contract lengths, followed by pipelines, gas utilitiesand marketers. Electric utilities and industrial customers have theshortest average contract lengths remaining. Listed in the studyare the top 50 storage capacity holders.
For more information call (703) 526-7832 or E-mail: baseline@gri.org. The study is $250for GRI members and $325 for nonmembers, plus shipping and handling.
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