Although total US working gas storage capacity has remained mostly static in the last two years, strong production and less price volatility has reduced the need for investing into additional underground storage.
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US natural gas' demonstrated peak storage capacity declined slightly year over year in 2020, while total working gas capacity increased marginally, according to the US Energy Information Administration's annual storage report.
"Working natural gas design capacity increased by 5 Bcf in the South Central region," the report said. "The most notable increase in the region was the 4.2 Bcf gain reported for the Egan Storage Dome by Egan Hub Partners. Dewatering the salt cavern raised the capacity of this field."
Demonstrated peak storage capacity represents the highest amount of working gas recorded. Working natural gas design capacity means the maximum amount of working gas that could feasibly be injected into storage.
Demonstrated peak capacity from December 2015 through November 2020 totaled 4.253 Tcf. The South Central region had the highest demonstrated peak capacity volume of 1.439 Tcf of all five regions. However, at 1.186 Tcf in the Midwest region, it was at 97% of maximum capacity compared with 93% reached in South Central. It was the second consecutive year in which Midwest stocks nearly reached peak capacity.
Data by S&P Global Platts Analytics demonstrates the region is already showing strong injection activity early in the season. Injections in the first half of April averaged 1.4 Bcf/d, 399 MMcf/d above 2020 and the strongest for the time in at least six years.
Temperatures, however, dropped later in the month and brought injections for the entire month to their weakest since 2017 at 1.4 Bcf/d. However, injections did ramp up at the end of the month, leading to another remarkable start to May injections, at 4.4 Bcf/d month to date. Platts Analytics expects this to mellow slightly, with an average of 4.1 Bcf/d this month, up roughly 700 MMcf/d year on year.
The EIA report finds several trends in recent years have reduced the necessity for investing in new underground storage. Higher levels of natural gas production compared with a few years ago may have reduced some customers' need to withdraw from storage to meet their natural gas needs. Gas price volatility has declined in recent years. The seasonal spread between summer and winter gas prices has shrunk, reducing economic incentives to inject supply into reservoir and aquifer storage. Also, midstream investment has enhanced grid interconnectedness and flexibility.
However, growing demand in gas-fired power generation as well as ever-increasing exports via LNG terminals and pipelines to Mexico could increase the need for additional storage, especially in the South Central region.
In April, exports to Mexico reached record levels just shy of 7 Bcf/d, Platts Analytics' data shows. The record-setting volumes were accompanied by population-weighted temperatures in the upper 70s Fahrenheit, about 5 degrees above normal, and by a spike in electric cooling demand.
LNG feedgas current levels have averaged 10.4 Bcf/d month to date, putting the figure higher than May 2020 levels by 44%, according to Platts Analytics.