Gas storage and Canadian imports have become key sources of winter natural gas supply for the U.S. The use of storage and imports to meet winter peaks has reduced the importance of domestic deliverability; by extension, this means that a lower level of resource exploration and development will support current and future demand. However, the growing use of storage may lead to price instability and may increase the risk of spot shortages and curtailments during the summer.
The U.S. natural gas industry has been revolutionized since the supply and price crisis of the early 1970s. Some of the changes which the industry has experienced have had impacts both far-reaching and widely recognized; the FERC deregulation orders are obvious examples, But some other changes have recast the industry in ways which may not be fully appreciated.
This article will discuss two of the changes which have had more subtle effects on the gas industry: the growing use of gas storage and gas imports to meet demand. As the article will discuss, the price of gas and its availability are now largely a function of how gas storage and imports are managed, and less a function of domestic exploration, development and production than in the past.
Stored gas is used, in conjunction with imports, to meet consumption peaks which exceed domestic wellhead production. U.S. gas production is relatively constant, about 1.5 trillion cubic feet (TCF) per month. However, consumption is far more variable and can exceed production by a wide margin. In January, 1992, for example, consumption was 2.2 TCF and production was only 1.6 TCF. The difference was made-up from storage withdrawals and imports.
In the summer and shoulder season months (April through October) production exceeds consumption. Although some gas is injected into storage and some gas is withdrawn every month of the year, April through October are invariably net injection months, while November through March are net withdrawal months.
A large portion of the gas in storage is base gas, which is used to maintain facility pressure and cannot be withdrawn. Working gas volumes are those volumes above the base which are available for withdrawal to meet demand.