# Presentation: 513326

## Natural Gas StorageNorth American Gas Storage Conference

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

**February 6, 2002**

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

## Outline

**Overview**
**EIA Projections**
**Update on new EIA weekly storage data project**

## 415 underground natural gas storage sites in the United States

***Deliverability: 78 Bcf per day ***
***Working Gas Capacity: 3,923 Bcf ***

**Notes:**
·  There is substantial working gas capacity, although this is a gross figure that includes sites that have not been active in recent years

Additional capacity is expected to come on line.  In the next 5 years there are plans for 15 expansion projects and 18 new sites (typically not all are built) 

Total new capacity: almost 279 Bcf of working gas capacity and almost 16 Bcf in  deliverability 
   - 60% of projects are high deliverability salt domes 
   - salt domes projects are just over half the working gas capacity, but more than 75% of deliverability

This figures does not reflect the numerous LNG sites

## Natural Gas Consumption Varies Widely by Month

- Source: EIA, Natural Gas Division

**Notes:**
Storage is needed to accommodate seasonal variation.

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 for the 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.  

## Natural Gas Wellhead Price

**Source: History: Natural Gas Monthly;  Projections: Short-Term Energy Outlook, January 2002**

**Notes:**
Now for the January short-term forecast from EIA.  

A key feature of the gas forecast is the expected prices.  Natural gas wellhead prices are expected to average $2.05 per Mcf, less than half the $4.14 estimated for 2001.  

The dramatic price rise in 2000 apparently was a transitory event.  Conditions through 2003 are not expected to lead to a recurrence.  

EIA conducted 2 studies last year at the request of the Secretary that concluded that the prices were a result of market forces.  

Let’s turn to a look at the demand picture behind this price projection. 

## Natural Gas Demand Growth by Sector (Change from Prior Year)

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

- * Includes gas to electric utilities and nonutility generators.

**Notes:**
Consumption is a key factor in the market and drives needed storage.  

Residential and commercial demands for natural gas in 2002 are expected to be higher than in 2001 by 6.2 and 1.3 percent, respectively, due to assumptions of normal weather. 

Industrial gas demand, which was under downward pressure all through 2001, is projected to begin to rise in the first quarter of 2002.  This expectation is seen as the result of the reversal of significant fuel substitution away from natural gas that occurred last winter and, further into 2002, of the gradually reviving economy.

So, how well situated is storage this winter?

## Working Gas in Storage Is At Very High Levels 

**Notes:**
This figure shows recent working gas inventories — as of early January -- relative to the historical monthly highs and lows for the years 1995-2000.

A key difference between 2000 and 2001 was that the 2001 futures prices for December/January delivery were consistently much higher than cash prices.  The difference was much less in 2000.  The high relative difference motivated strong additions to storage in 2001. 

A very large volume of net injections during 2001 resulted in large working gas stocks entering the present winter.  Further, the very warm weather has limited net withdrawals from storage, so stocks remain very high.

As of January 25, stocks are more than 600 Bcf above the 5-year average and 1 Tcf above last year.  

## Storage Projections Under Alternate Withdrawal Scenarios

**Notes:**
This slide shows end of winter working gas stocks under 3 scenarios:  at average rates for the remainder of the winter (from early January) , and at either the highest or lowest historical rates.  (Based on monthly withdrawals for 1995-2000)

End of winter stocks in these scenarios are 1,600 Bcf (Mid case), 1,250 Bcf for the high withdrawals, and 1,958 Bcf for low withdrawals.

The January STEO projection is 1,460, which itself exceeds the 6-year maximum of 1,406 (1999).

Cumulative net withdrawals in January 2002 have been 480 Bcf through 1/25.   The net drawdown is unlikely to reach the 635 Bcf average for January (1995-2000). 

As an update, working gas as of  January 25 is estimated at 2,341 Bcf.  This is consistent with the mid case path.

## Natural Gas Consumption Through 2020

**Notes:**
For the long-term, we see the consumption projections through 2020 from the EIA Annual Energy Outlook 2002.  

These projections show consumption in all sectors is expected to grow.  

The most dramatic growth is projected for gas used in electric generation, which expands almost 2 and one-half times from 4.2 Tcf in 2000 to 10.3 in 2020.  

This is an average annual growth rate of 4.5%, which far exceeds the second fastest growing sector, commercial, which is projected to have a 1.6% growth rate.

Now, let’s turn to the new EIA project to collect and release weekly storage data.

## Key Features of the Weekly Storage Data Project

- Weekly data collection and release
- Mandatory collection
- Sample survey
- Items being collected

**Notes:**
The new program is weekly, intended to replace the AGA series. 

The survey will be mandatory as a requirement for statistical validity.

The weekly EIA survey will be based on a sample of companies—expected to be roughly 50-60.  This is unlike the monthly survey, which goes to all companies  

The weekly survey will be on a company/region basis, unlike the EIA monthly approach, which is on a facility basis.

AGA collected 3 items: working gas volumes for the current week, the prior year, and the maximum for the period from 1992-2001
EIA will collect the working gas volume for the present week, and if changes to prior data are warranted, the respondent will supply that information also.

## Project Schedule Milestones

**October:      Project begins**
**November:  Working meetings with AGA**
**December:  Submit clearance package to OMB**
**January:      OMB clearance**
**Feb/Mar:      System development and testing**
**April:            Operational testing**
**May:             Initial release and operation**

**Notes:**
At present, the project remains on schedule.

We expect to have our first release on or about May 9th.  The specific date and time have not yet been determined.  

## Comparison: EIA and AGA Storage Data

**EIA monthly**

**End March: 18% difference**

**AGA weekly**

**Notes:**
One last area for discussion: the differences between the EIA and AGA series.

Both agencies have provided measures for working gas in underground storage.  The numbers were not always close -- as can be seen in the data for 2001.  

The typical pattern for the 2 series is general agreement around the start of the heating season, then larger discrepancies during the refill period.  

EIA plans a report for distribution around the time of the first data release that will address differences in the EIA and AGA series, and any issues in consistency between the EIA weekly and monthly series.