Environmental Engineering Reference
In-Depth Information
KeyTrendsInfluencingFutureValueofNaturalGasStorage
Three significant market trends are changing the nature of natural gas stor-
age markets. First, pipeline restructuring is changing the role and value
of storage. Pipeline restructuring following FERC Order 636 led to market
changes influencing the use and value of natural gas storage. These changes
include the unbundling of pipeline service, a shift to straight fixed variable
rate design, the development of a secondary market for storage and pipeline
capacity, the growth in importance of market hubs and gas marketers, and a
shift toward market-based rates for storage service (Beckman et al., 1995).
Second, the growth in gas usage for power generation is likely to increase
the value of market area storage. Due to improvements in technology, favor-
able economics, and low emissions, natural gas is expected to be the incre-
mental fuel for power generation for the foreseeable future. In addition,
electric utility restructuring is resulting in the development of a flexible and
visible spot market for electric power, greater incentives to minimize costs
and increase operational flexibility of generating stations, increased flex-
ibility, and incentives to arbitrage between natural gas and alternative fuels
to generate electricity. These factors are likely to increase the value of high
deliverability market area storage.
Finally, LDC restructuring is likely to increase the efficiency of storage
services.
Natural gas LDCs are restructuring and unbundling in many states. The
gas merchant function would be subjected to greater competition with ser-
vices provided by gas marketers including unregulated affiliates of existing
LDCs. At least initially, many more entities will hold the rights to pipeline
and LDC storage. The holders of storage are more likely to have direct profit
motives to maximize the value of the storage; hence, the market is likely to
see new storage services offered and more effective use of existing storage
facilities to increase profitability.
TypesofNaturalGasStorage
The three major types of “reservoirs” common to the underground storage of
natural gas are (1) depleted reservoirs, (2) aquifers, and (3) salt caverns. The
East Coast region is characterized by depleted reservoir and aquifer storage;
the Gulf Coast has a mix of depleted reservoir and salt cavern storage; the
West Coast mainly uses depleted reservoirs. The components of a gas stor-
age field are similar for depleted reservoir and aquifer facilities. Figure 8.3
illustrates the basic components (University of Michigan, 1978).
