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Aliso Canyon limit, pipeline repairs keep SoCalGas prices at record winter highs

Colder-than-normal weather, along with continued pipeline and storage restrictions, have pushed Southern California Gas Co.'s SoCalGas Citygate natural gas prices to record highs this winter, the U.S. Energy Information Administration said in a March 19 note.

SNL Image

"Average spot natural gas prices at the Southern California Gas Citygate are on record pace so far this winter, averaging $7.23/MMBtu" since Nov. 1, 2018, the EIA said. "The spot price of natural gas at the SoCalGas Citygate has averaged about 76% higher than the average price at this trading hub for the same period during the winter of 2017-18."

Spot prices at the city gate peaked at $21.50 on Feb. 21, according to S&P Global Market Intelligence data, and were routinely above $10/MMBtu for much of February.

The Sempra Energy affiliate has issued operational flow orders, designed to match gas supply and demand closely, and these have also contributed to the price spike, EIA said.

Since a 2015 leak at the Aliso Canyon underground gas storage field, state regulators have restricted the amount of gas in storage at the facility to 34 Bcf, down from 86 Bcf. The move cut SoCalGas' total storage capacity to 87 Bcf, down from 137 Bcf. Two transmission pipelines inbound to the area are still being repaired after a 2017 explosion, lopping off additional capacity into the service territory.

Because of the infrastructure issues and high customer demand from cold weather, shippers are paying premium prices to get their gas into the city gate.

The average difference of gas delivered to the SoCalGas Citygate and the benchmark Henry Hub in Louisiana is $3.73/MMBtu so far this winter, three times higher than the same period last winter when the city gate had similar issues, EIA said.

"Before the winter of 2017-18, the typical average winter basis between the SoCalGas Citygate and the Henry Hub was less than $0.35/MMBtu," EIA said.