While seasonal spreads in natural gas prices have contracted, to be sure, it hasn’t hampered the business of at least one gas storage developer/operator, who also believes wider spreads will return, thanks in part to liquefied natural gas (LNG).
“Obviously, spreads have come in somewhat, but they’re still very strong. They’re back to where they were [in] February of this year; that was a record high at the time. They’re not as high as they were a few months ago,” John Hopper, president of Falcon Gas Storage Co., told NGI Thursday. “Our customers are paying the same rate today — and these are contracts we just signed — that we negotiated six months ago. So, we’re on either side of that spread, and we’re seeing our customers wanting to step up and buy the same kinds of services, and they’re willing to pay the same kinds of rates.”
The compression of the summer-winter spread makes a difference to someone who’s just trying to capture the spread. But Hopper said that since his customers are contracting for terms of “three, five, seven, 15 years,” they’re taking a longer view. “I’m not sure I agree you have to take a discount for that service,” he said.
And the seasonal spread could very well widen again, just like it did following last winter.
“If we’ve got a lot of storage gas coming out of this winter and there is still a perception that winter gas is worth a lot more than off-peak gas, I think we’re going to see a repeat of the same scenario we just saw coming out of this last winter where there’s [a more limited] amount of storage capacity to put gas in the ground. We have seen an increase in production. If any LNG comes in during that off-peak period, it’s going to crush front-month prices relative to the back months. How far out that spread goes is, I think, anybody’s guess. We’ve seen it go as high as four-and-a-half, almost five dollars.”
©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 2577-9877 | ISSN © 1532-1266 |