# Presentation: 740401

## A Review of the EIA Weekly Survey of Natural Gas In Underground Storage22nd Annual North American Conference of the IAEE/USAEE

- William Trapmann *william.trapmann@eia.doe.gov*
- Natural Gas Division
- Energy Information Administration

**October 8, 2002**

**Notes:**
EIA: an independent statistical agency intended to assure the availability of adequate, comparable, accurate, and credible energy information.

## Outline

**Background on Underground Natural Gas Storage**
**Update on new EIA weekly storage data project**
**The Outlook for Winter 2002/2003**

**Notes:**
I have three objectives for the presentation:

Provide background on underground natural gas storage 

Provide an update concerning EIA’s new weekly storage survey, which “replaced” a survey formerly conducted by the American Gas Association (AGA). AGA ceased the survey in May 2002 for a number of reasons.

Lastly, I will comment on EIA’s outlook for the upcoming winter.

## Storage Capacity and Volumes January 1999-June 2002

- EIA Total Gas in Storage

- Base Gas

**Notes:**
This slide shows the various levels of base and working gas in storage, and storage capacity since 1999.

Key point:  capacity measures, as well as volumes, vary over time. For example, total capacity expanded from 8,155 (January 1999) to 8,376 (June 2002)

If you want more information on basic storage concepts, EIA just released a report that is available on its web-site.

## Natural Gas Consumption Varies Widely by Month

- Source: EIA, Natural Gas Division

**Average for the Northeast**

**Notes:**
Storage is a very important part of the supply picture in meeting the very wide swings in gas demand.

Total gas demand in the Northeast during February is roughly 2.4 times the level recorded in September.  The swing in total demand is driven largely by variation in residential consumption, which is roughly 7.5 times higher in February compared to August.  

This figure is a comparison of average daily consumption by month.  The differences in daily rates would undoubtedly be even more severe.

As a point of interest, note the counter-cyclical pattern for electric utilities.  

## Key Features of the Weekly Storage Data Project

**Weekly data collection and release**
**Mandatory collection**
**Sample survey**
**Collecting current working gas volumes**

**Notes:**
The EIA weekly storage survey began on time and within budget with excellent response rates

EIA’s survey is mandatory as a requirement for statistical validity

The weekly EIA survey is based on a sample of 45 companies.  This is unlike the monthly survey, which requires responses from all underground storage companies

For the weekly, EIA surveys on a company/region basis; this is unlike the EIA monthly approach, which is on a facility basis.

EIA collects the working gas volume for the present week, and if changes to prior data are warranted, the respondent supplies that information also.

## Causes of Revisions

-  **Reporting responsibilities for fields**
** ****Confusion about joint field operations**
** ****Issues of base, working, or total gas**
** **
** ****Updating reference month for estimation parameters**

**Notes:**
As many know, there were several revisions in the first weeks after EIA launched the survey. We have tried to inform our customers regarding the occurrence and causes leading to the revisions. However, the survey is conducted on a confidential basis, which limits the amount of information that may be released.

The first 3 causes are frequently encountered when starting a new survey.

The fourth item is being addressed in a review of methodology.

Let’s look at some performance measures.

## EIA Monthly and Weekly Data Have Become More Consistent  

**Calculated differences between EIA and AGA estimates**

**Notes:**
This slide shows the differences between the EIA monthly and weekly series relative to the American Gas Association (AGA) series.  The AGA series is used as a benchmark to better display the EIA monthly and weekly patterns. 

Although the EIA weekly series initially was close to the AGA series, it differed from the EIA monthly.

After adjustments to both the weekly and monthly series, they seem more consistent.

So the adjustments to the weekly series seem to have improved its accuracy.

## Revisions Have Become Much Less Frequent

- 1 revision in 11 weeks

- 5 revisions in 10 weeks

**Notes:**
We feel that we’ve turned the corner on our startup problems.

There were five revisions in the first 10 weeks of the survey. 
EIA believes it is making progress on eliminating revisions: There has been only one revision in the following 12 weeks.

So, the weekly series seems to be performing well. Based on the data, what does EIA anticipates for gas markets this winter?

## Winter Prices Exceeded Spot Prices Greatly During Refill Season

**Notes:**
A key influence behind the large volumes of working gas in storage is the relative position of spot and futures prices.

This slide shows the “spread” between spot prices and Winter 2002/2003 NYMEX prices. The average “spread” during the refill season (through Mid-September) was about 68 cents.

## Working Gas Stocks Exceed Previous 5 Year Levels

**Source: EIA, Weekly Natural Gas Storage Report, September 26, 2002.**

**Working Gas Stocks as of September 20, 2002.**

**Notes:**

This figure is published every week with our announcement of working gas inventory estimates. It provides a look at how the current inventories fit in with the 5-year high and low inventories for the comparable week. As you can see, working gas inventories are above the highest levels in the last 5 years.

Working gas inventories as of September 26 are 3,038 Bcf. This exceeds the high for the past five years (recorded last year) by 277 Bcf. Inventories are 10 percent higher than the average over the past 5 years for the comparable week. Generally, a level of 3-3.2 Tcf of working natural gas in storage  by November 1 is considered ample.

## Weekly Storage Report Regions

_**Consuming East**_

**Depleted Fields**

**Salt Caverns**

**Aquifers**

_**Producing**_

**Source: Energy Information Administration, EIAGIS-NG Geographic Information System.**

***Weekly Storage Report Regions***

**Notes:**
This slide shows the location of storage facilities by region. EIA continued AGA’s division of Lower 48 States into three regions: The Consuming East, Consuming West and Producing Regions.

Although there are large volumes in storage, there are impediments to sharing inventories between or among regions.  Working gas stocks in the Producing Region can be directed to either of the other two regions, but sharing between the two Consuming regions is limited at best. 

## Total Natural Gas Demand Growth Patterns

**Total Natural Gas Demand Growth Patterns**

**Sources: History:  EIA;  Projections: *****Short-Term Energy Outlook*****, October 2002.**

**Notes:**
EIA believes consumption will likely increase over last year owing to a warmer-than-normal last year. Additionally, industrial demand should pick up as the economy emerges from last year’s recession. 

These assumptions of normal weather and a recovering economy are subject to uncertainty.

## Natural Gas Prices Will Remain Above $3 Through 2003

**Sources: History: Natural Gas Week;  Projections: Short-Term Energy Outlook, October 2002.**

**Notes:**
Despite the high storage levels in 2001, EIA believes that natural gas prices will remain above $3 through 2003.

 We expect to see natural gas wellhead prices averaging around $3.34 per Mcf, in the fourth quarter 2002 and first quarter 2003.  This is almost $1.00 per Mcf higher than last winter. 

So what does this mean for the typical residential consumer?

## Winter Residential Natural Gas Consumption and Costs

***Winter Residential Natural Gas ******Consumption and Costs***

- *Energy Information Administration projections: *Short-Term Energy Outlook*, October 2002 (assumes normal winter weather)
- Source: All other data: Energy Information Administration, *Natural Gas Monthly*.

**Notes:**
We use the “average Midwest household” because the highest concentration of households heating with natural gas is located in the region -- roughly 63 percent.

EIA assumes a return to normal temperatures compared with warmer-than-average temperatures last year. With colder temperatures, the higher use per household (12%), together with a higher price (6%), results in a magnified impact on household expenditure (19%). The impact underscores the relatively inelastic demand for natural gas.

EIA expects Midwestern homeowners will pay $114 more than last winter for natural gas – however, this is $235 less than two winters ago.

## Summary

**EIA’s new weekly storage data project **
**Revisions are much less frequent**
**Storage entering this winter is at relatively high levels**
**Natural gas prices, although higher through 2003, will avoid severe spikes**