The colder weather provided some much needed relief to a packed pipeline and storage system last week, but also sent spot prices soaring more than $2.50/MMBtu at the Henry Hub to the high $6.80s on Friday from about $4.30 a week earlier. During a Commission meeting last week, FERC staff said there has been no concrete evidence of large-scale production shut-ins due to the lack of storage space, but market observers had difficulty explaining how prices could climb so sharply with storage exceeding 100% full at a number of fields.
On Friday Oct. 13, multiple pipelines had either operational flow orders or warning notices in place restricting gas receipts into their systems due to high storage levels and packed lines. Dominion, Texas Eastern, Colorado Interstate Gas, Southern Natural, Transco, PG&E, Questar, ANR, Southern California Gas, Tennessee and CenterPoint all were warning shippers about the overfull situation.
Denver-based consulting firm Bentek Energy reported that total working gas in storage in the U.S. on Oct. 13 was about 95.2% of capacity. Bentek’s data showed seven separate storage operations with working gas levels at or above their nameplate capacities, while 11 others were at 95% full or above. Among those were some of the largest gas storage operators in the nation.
Dominion’s storage system was already at 100% full, with about 290 Bcf of working gas in storage. Columbia Gas, which received regulatory authorization late last month to temporarily increase its maximum storage level in 11 of its storage fields by up to a combined 6.5 Bcf (see NGI, Oct. 2), was 102% full with about 251.9 Bcf, according to Bentek.
The other fields at or above 100% full included the following: CIG’s Latigo field with 8.55 Bcf in storage compared to a maximum working gas capacity of 8.3 Bcf; the AECO storage hub in Alberta with 125 Bcf of working gas in the ground, compared to 125 Bcf capacity; Northern Natural’s system with 69.4 Bcf in storage (102% full); Blue Lake storage with 47.2 Bcf or 100% of capacity; and CenterPoint with 37.6 Bcf of gas in storage or 100% full.
Other important fields that showed near-full levels included: Questar’s Clay Basin facility, which is 99% full with 50.1 Bcf of working gas; the Jackson Prairie storage field on Northwest Pipeline with 22.4 Bcf, or about 99% full; Texas Gas Transmission with 54.5 Bcf in storage (99% full); and the ANR Pipeline System with 188.3 Bcf of working gas, or about 98% full.
But the tide clearly started to turn last Monday. Prices shot sharply higher, and Bentek reported that storage withdrawals were beginning at a few fields. Dominion Transmission’s strained operating condition most of this month was quickly remedied with several days of colder weather. On Friday, the company lifted an operational flow order.
Storage withdrawals also were taking place at the Egan salt dome in the Gulf Coast producing region and at Jackson Prairie and Colorado Interstate Gas’ (CIG) Latigo storage field in the West, according to Bentek.
“We’ve certainly seen injections slow down at a number of facilities over the last two weeks,” said Bentek’s Rusty Braziel. The Energy Information Administration (EIA) reported a 53 Bcf injection into storage last week for the week ending Oct. 13, putting working gas levels at 3,442 Bcf, or about 391 Bcf less than the same time last year and just shy of the all-time record of 3,472 Bcf posted at the end of November 1990. However, injections the week before totaled 62 Bcf and injections over the last three weeks of the traditional injection season are likely to decline rapidly.
“We had a trajectory that would have storage hit 3.8 Tcf by about Nov. 10,” said Braziel. “At this point in time, that would require injections over the next four weeks of nearly 90 Bcf [each], and I would say the odds of that happening now are pretty slim because of the colder weather and because the average over the last three weeks has been about 60 Bcf. It just doesn’t look like there are enough weeks left to get to a number that high. I suppose cold weather is trumping full storage at this point.
“All of our numbers say we are going to continue to inject gas over the next four weeks but just not at [high levels].” Braziel also said he doubts that high storage levels will force additional production shut-ins.
With what seemed like an overreaction in the spot market last week to the slightly colder than normal weather, some market observers were speculating that there may have been more production curtailments at the beginning of the month than just those reported by Questar and Chesapeake Energy (gross 220 MMcf/d). However, others said that many buyers may have gone into the month short because of the abundance of gas in the system and the expectation that prices would fall. The colder weather served as quite a wake-up call.
Source: Bentek Energy. Bentek said that rather than revising its capacity numbers on individual storage systems each week as they move over 100%, it is reporting all capacity numbers based on best information available from pipelines and other industry sources. “We will only change maximum capacity numbers when we receive third party verification of revisions,” the Denver-based consulting firm said.
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