Environmental Engineering Reference
In-Depth Information
the enactment of Order 636, pipelines owned 59% of the nation's storage and
managed most of their storage for system supply support. LDCs owned 38%
of the national storage capacity and leased additional volumes from pipe-
lines. The remaining storage was held by special purpose companies that
generally offered sole use facilities to clients based on long-term leases. After
Order 636 appeared, LDCs exchanged bundled gas services for comparable
storage capacity. As a result, LDCs now control more than 70% of the current
U.S. storage capacity.
LDCs
In general, LDCs continue to utilize most of their market area storage for
seasonal baseload and peaking service. The key objectives for LDCs in eval-
uating the use of storage are supply security, peak-day coverage, and cost
minimization. Ownership of the storage gas, proximity to points of con-
sumption, and minimization of pipeline demand charges impact the LDC
storage utilization decision process.
Production area storage is used by some LDCs as a substitute for more
expensive swing supply arrangements. Gas is rarely held as a supply aggre-
gation tool or for price arbitrage purposes. Production area storage is gener-
ally the first assigned to suppliers when LDCs trade capacity management
for supply price discounts from long-term gas suppliers. High deliverability-
high injection salt cavern projects have caught the imagination of all indus-
try members except LDCs. Most such products want 75% or more financing
of the $40 to $120 million price tags based on the credit qualities of the term
lease storage clients the developers are seeking.
New production area reservoir storage projects are developing horizontal
drilling technology as a method of enhancing reservoir injection and with-
drawal characteristics to mimic salt cavern storage service offerings. This
trend among reservoir storage developers reflects the perceived value of
deliverability and flexibility of field area storage.
Suppliers and Aggregators
Gas marketing entities range from major corporations that take title to the
gas to individual brokers living off buying and selling relationships. The
larger supplier and aggregators offer extremely competitive swing gas sup-
plies to LDCs, electric generators, and industries, often simply by manipulat-
ing daily gas flows and attempting to operate within the balancing practices
of the pipelines.
Major marketers are aggressively entering the storage market as develop-
ers, clients, and agents. They are willing to invest in storage for the dura-
tion required to finance projects due to their need to establish the security
of their supplies. They have hard assets in their portfolios in lieu of equity
gas production and take advantage of the LDCs' willingness to pay swing
