Withdrawals

Forecasting higher storage withdrawals this winter than last and less available liquefied natural gas (LNG), analyst Stephen Smith predicts that 2008 Henry Hub prices will exceed last year’s by more than $1/MMBtu. The caveat is that the rest of the winter does not turn out to be much warmer than normal.

Sparked by natural gas futures gains through Thursday on the New York Mercantile Exchange, Northeast and Louisiana points mostly posted single-digit gains Friday, while low gas demand and moderate temperatures allowed most of the market to shed anywhere from a couple of pennies to 83 cents, with the largest drops coming from the Midcontinent and the West.

Due to the harsh winter weather in February and early March that has led to significant withdrawals from natural gas storage, the Energy Information Administration (EIA) in its Short-Term Energy Outlook for March has raised its projections for gas spot prices this year and next.

Due to the harsh winter weather in February and early March that has led to significant withdrawals from natural gas storage, the Energy Information Administration (EIA) in its Short-Term Energy Outlook for March has raised its projections for gas spot prices this year and next.

The colder weather appears to be providing some much needed relief to a packed pipeline and storage system, with storage withdrawals reported on Dominion Transmission’s system in the East, 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 Denver-based consulting firm Bentek Energy.

El Paso said there will be no withdrawals from its Washington Ranch storage facility through Friday while repairs are made to the dehydration plant’s fire tube. Washington Ranch’s #2 compressor was already down for maintenance through Oct. 17, limiting injections to about 75 MMcf/d. As a result of these maintenance projects, El Paso said it has lost a large degree of operational flexibility and will impose custody limits on delivery points and/or place caps on receipt point as needed to maintain system integrity.

Saying drafting continues on its south system and that the Washington Ranch Storage facility has been experiencing maximum withdrawals since Monday, El Paso declared a Strained Operating Condition (SOC) Thursday. Although the SOC is directed specifically at the Arizona Public Service utility and Panda Resources’ Gila River Power Plant, the pipeline urged all shippers to bring their supplies and demand into balance to minimize the SOC’s duration. The imbalance threshold for negative daily imbalances was set at 7%.

While falling well short of historical withdrawals for the week ended Jan. 14, the 110 Bcf withdrawal announced Friday by the Energy Information Administration was just high enough to beat out the industry consensus of a 105 Bcf withdrawal.

Saying withdrawals from its Washington Ranch storage facility were at maximum levels, El Paso declared an Unauthorized Overpull Penalty situation Tuesday.