Improving Competitive Position with Natural Gas Storage

Fortnightly Magazine - October 15 1995
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On a cold day, natural gas from storage reservoirs may supply as much to markets as gas from producing wells. The ability to store gas underground not only ensures reliable delivery during periods of heavy demand, but also allows more level production and pipeline flows throughout the year. Thus, some believe that the cost of storage should be spread over all gas delivered during a year, not just gas delivered from storage sites to end-use customers during the winter. They believe storage improves the efficiency of the overall system and lowers cost of service to all customers throughout the entire year.

Gas reservoirs are increasingly important to the industry's inventory management.1 For heating years 1989-90 through 1993-94, average monthly injections and withdrawals per storage field rose significantly from an earlier five-year time period (heating years 1982-1983 to 1986-1987). Average injections during the heating season (November-March) increased 37 percent over the mid-1980s average, while working gas levels (the amount of gas available in storage to serve markets) increased by only 9 percent. Similarly, average withdrawals during the nonheating season (April-October) increased by 47 percent, while working gas levels increased only 10 percent. Withdrawals between

heating seasons 1986-1987 through 1991-1992 also increased systematically, even accounting for differences in the weather.

Data for 1991 through 1993 also show that the industry was able to operate with declining amounts of working gas. Interestingly, in addition to saving money by reducing their stocks of gas in storage, companies were also reducing their exposure to price risk between seasons.2

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