Technology Corridor

Fundamentals in the energy markets are converging to increase the need for incremental gas storage.

The natural gas market is approaching a dramatic turning point. The fundamentals in the energy markets are converging to increase the need for incremental gas storage and the way that storage is used and valued by the customer community. Why is new storage needed? What will it take for new storage to be developed? What do customers need to commit to new storage projects? And how does the energy industry get all of these items reconciled?

The Basics

The natural gas industry has always had a fascination with storage levels. Storage levels are used as a barometer for gas supply-and-demand trends. The industry traditionally has used the level of storage to predict seasonal gas utilization and prices. In some cases, storage levels have acted as a magic crystal ball, holding the secrets of near-term and future natural gas demand, supply, and pricing. However, the focus on how full storage levels are overlooks the more serious question: What do we do when fully utilized storage capacity is not enough to get us through the winter?

Traditionally, storage has been filled during the summer, when demand (in theory) on the pipelines and the cost of natural gas is lower. Gas is taken out of storage during the colder winter months to fill peak-day needs. With an increasing amount of electric generation being supplied by natural gas-creating growing summer demand on pipelines and more stable summer prices-the way the industry views and values storage is rapidly changing.