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Gas storage operator sees 'serious problem' for industry after Aliso Canyon leak

Preventing a repeat of the Aliso Canyon gas storage well leak could do more than cost a lot. According to the manager of the Louisiana-based D'lo Gas Storage, modernizing the nation's storage wells could significantly reduce deliverability.

The Southern California Gas Co. facility spewed an estimated 4.62 Bcf of gas over almost four months before being plugged in February 2016. The utility company said in November 2016 that the leak would cost $763 million, not including costs related to litigation.

Speaking at the S&P Global Platts Gas Storage Outlook Conference in Houston, Theo Bean said poor design of the wells, which were not changed over time, played a key role in the blowout.

While the Aliso Canyon leak has been an isolated incident to date, Bean said, similar situations could easily occur elsewhere. Approximately 80% of the wellbores now characterized as natural gas storage wells were drilled before 1980. "There are 13 active storage fields with a cumulative working gas capacity of 215 Bcf that were discovered prior to 1900," he said.

The risks to the aging gas storage fleet are numerous, Bean said. Steel corrosion, cement breakdown, erosion and material defects are just some of the major sources of concern.

"What happened in California is bad for the environment. It's just horrible," he said. "But it was an oil field that was converted to natural gas storage, and the problems started when things like benzene were added."

Bean said that to prevent a repeat of Aliso Canyon, all storage wells need a tubing and packer setup with a subsurface safety valve. Of the approximately 17,000 storage wells in service in the U.S., however, between 12,000 and 14,000 lack this setup.

The cost to modify existing storage wells could be prohibitive. Bean said the average cost per well could be between $181,000 and $250,000, putting a total price tag in the billions of dollars.

Another major problem is that adding the tubing and packer setup as a second barrier will significantly hurt deliverability. Bean said some estimates show the flow coming back out of modified wells being as low as 15% of what it was before. Even if the amount is 50% of the total, he said, flows will be significantly reduced.

"We're going to go from 75.2 Bcf [storage in depleted fields] to a deliverability as low as 47 Bcf," he said. "So we've got a problem. We've got a serious problem."

The Aliso Canyon situation, Bean said, leaves storage companies using older well casings in a difficult situation.

"There's nowhere to hide," he said.

S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.