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LNG exports creating 'real opportunity' for Gulf Coast gas storage, exec says

The amount of LNG being delivered to the Gulf Coast for export could allow natural gas storage companies in the region to develop their own market storage model, the president of storage and fuels for Southern Company Gas said Jan. 7.

Speaking at S&P Global Platts' Annual Gas Storage Outlook Conference, Tim Hermann said there is now 3 Tcf of export capacity along the U.S. Gulf Coast, which is equivalent to about 10% of the nation's natural gas consumption. The amount of gas consumed by a single LNG train, he said, is remarkable.

"Each LNG train equates to [the consumption of] a large northern utility," he said. "Annually, not a peak day."

Hermann said gas storage facilities have understandably been developed with the idea of having them in close proximity to the markets they would serve. While that remains the case for most major markets, storage in the Gulf Coast region has been limited. Explosive grown in the region, Hermann explained, has turned the classic equation on its head. The Gulf Coast is not shipping gas to the rest of the country as was once expected; it is now requiring more natural gas than virtually anywhere else in the nation.

"Gulf Coast is now at the downstream end of the pipe. You don't have the flexibility you had when it was the upstream end," Hermann said.

The LNG export market has not only created the need for new storage on the Gulf Coast, it could also present a new opportunity. The amount of gas being pumped into the region could allow for providers to set terms separate from Henry Hub pricing.

"Storage asset values are once again being driven by their ability to address a specific market's critical operating needs. LNG and petrochemical development in the Gulf Coast has created huge new markets with critical balancing needs," Hermann explained. "The storage industry has a real opportunity, with these Gulf Coast markets and nearby storage assets, to create their own market storage model … Location is critical."

The opportunities provided by rapidly increasing demand on the Gulf Coast, he said, can only be taken advantage of if storage facilities act responsibly and actively work to limit methane emissions. Ignoring environmental concerns, Hermann said, could destroy a great opportunity for storage providers.

"We've heard natural gas is here to stay. I want to believe that, but we in the storage business need to take that message [to limit methane emissions] seriously," he said. "We don't want to go the way of coal. We've got to get that part right.

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