After a four-year struggle and one failed open season, sponsors of a proposed high-deliverability gas storage facility that could become a major Midcontinent spot market location have launched a redesigned project they say is larger but more affordable. HNG Storage, The Williams Companies and Coastal Corp.’s ANR Storage Co. said they expect to file an application with FERC for the $50 million project, called Kiowa Gas Storage, in March.

The 7.5 Bcf working capacity salt cavern is to be located in salt formations near an existing 5 Bcf/d gas pipeline hub in Kansas. It will be directly connected to ANR Pipeline, Northern Natural Gas, Panhandle Eastern, and Williams with access through backhaul services to Colorado Interstate Gas, Natural Gas Pipeline Company and Kansas Gas Service. Sponsors are holding an open season starting Feb. 9 and ending March 4 to collect customer interest. First service is expected in December 1999.

HNG originally designed the project in 1994, but high costs of development and problems getting water to the site for salt leeching caused a delay. HNG brought Williams on board in 1996 and signed contracts with local farmers to use their water for a couple of years for leeching. But a 1996 open season proved unsuccessful in attracting sufficient customer demand.

“When we first did this project – and this was kind of the same as a project Enron had developed up there called Mullenville – the costs were about $3/Mcf/year,” said HNG Chairman Jim Walzel. “It was a real Cadillac sort of project and we found people couldn’t pay that. Now the costs are down to where we can build the thing at around $1.70/Mcf/year. If you can cycle it several times per year, it gets down to a fairly low cost per cycle. You cycle it five times, you’re in the 30-cent range per cycle.” About eight companies expressed interest in the first open season, and Walzel said he expects they will be back at the table this time around.

Consisting of 16 gas storage caverns created in a salt layer at a depth of 2,000 feet, Kiowa will have a total maximum daily withdrawal rate of 625 MMcf/d with an injection rate of about 225 MMcf/d when it is in full operation in May 2002. The first phase of the project, scheduled for service in December 1999, will consist of four salt caverns with about 1.9 Bcf of working gas capacity. Subsequent phases, each consisting of four additional caverns, are planned for completion in October 2000 and August 2001. The facility will be designed to cycle seven times per year rather than the original 12 times per year.

“We’ve gotten the thing down as cheap as we can and sort of decreased the services offered to try and get it down to a level that’s affordable for people,” said Walzel. “We’ve increased the size, reduced the number of cycles, lowered compression requirements and decreased unit costs. We’re getting more capacity at a lower cost. We’re real optimistic that we’re going to get this thing off the ground. We’d better because it’s going to die of old age pretty soon.”

Rocco Canonica

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