Denver — As a historic heatwave scorches stretches of California, the Aliso Canyon natural gas storage field continues to report daily net withdrawals in order to meet cooling demand, catapulting regional prices.
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Southern California Gas Company has withdrawn from Aliso Canyon inventories for six consecutive days as of Aug. 19, the first time it has done so since early April, as torrid temperatures continue to put pressure on gas prices amid system constraints driven by elevated demand.
More than 1.2 Bcf has been withdrawn from Aliso Canyon since Aug. 13, and there are likely to be additional draws this week as demand is expected to remain high, according to S&P Global Platts Analytics. Data indicates on-system demand hit a summer-to-date high of 3.38 Bcf/d on Aug. 17, more than 1 Bcf/d above the the prior 30-day average.
Since Aug. 13, SoCal Gas has net withdrawn from storage at a rate of 513 MMcf/d. In contrast, over the past three years, fields injected at an average rate of 205 MMcf/d over the same time frame.
According to SoCal Gas' electronic bulletin board, on-system demand is forecast to average 3.15 Bcf/d through Friday, Aug. 21, implying strong withdrawals from storage inventories will likely persist.
The demand surge coincides with multiple maintenance events, prompting utilities to pull more from storage due to pipeline constraints.
SoCal Gas said Aug. 16 that pipeline remediation work along section L235-2 would be completed by Aug. 17, reinstating 170 MMcf/d of operational capacity at the Topock/Needles Area Zone. However, as capacity increases at the Topock/Needles receipt area, the overall Northern Zone receipt capacity will only increase marginally by 20 MMcf/d as Kramer Junction has been running at increased capacity to largely offset the Topock/Needles constraint.
The heatwave across parts of state led to California Independent System Operator declaring a Stage 3 electrical emergency on Aug. 15, causing brief rolling blackouts for customers for the second night in a row as elevated cooling demand has spiked gas prices across the state to summer highs. CAISO enacted the emergency following the unexpected loss of a 470 MW power plant and loss of 1,000 MW of wind power amid already elevated electricity demand due to the heat.
Temperatures across the state have averaged over 82 degrees since Aug. 14, roughly 8 degrees above normal, and are expected to remain above 80 through the end of the week. On-system demand for both SoCal Gas and Pacific Gas and Electric operators has remained high since Aug. 14, averaging 2.87 Bcf/d and 2.64 Bcf/d, respectively, according to Platts Analytics.
The heightened demand has pushed gas pricing across major hubs to summer-to-date highs, with basis versus Henry Hub at SoCal Gas city-gate, PG&E city-gate; and PG&E Malin averaging $4.45/MMBtu, $1.10/MMBtu, and 23 cents/MMBtu, respectively, over the weekend. SoCal Gas basis hit as high as $10.94/MMBtu on Aug. 18 and has averaged $5.14/MMBtu over the past six days.
Though some relief to pricing may come from the return of additional generating capacity up north following unexpected power outages, scorching temperatures are likely to maintain upward pressure on pricing in the near term.