Ready to Let Go - Are Gulf Coast Gas Storage Rates High Enough to Support Greenfield Projects?

Many of the natural gas storage projects under development along the Gulf Coast involve the expansion of existing salt-cavern complexes and, with that, the sharing of at least some already-built infrastructure. That typically saves money, and the lower capital costs can help make a project a “go.” But at least a few well-sited projects competing for commitments are greenfield in nature and require not just the buildout of storage capacity itself but also the development of compression, freshwater wells, saltwater disposal wells, electricity supply, header pipelines and pipeline interconnections. In today’s RBN blog, we discuss two of the largest greenfield projects in the works: the Black Bayou Energy Hub in southwestern Louisiana and the Freeport Energy Storage Hub (FRESH).

This is the fourth blog in our series on Gulf Coast gas storage. In Part 1, we explained that a combination of factors — rising gas production, increasingly undulating demand for gas (tied in part to the ups and downs of wind and solar power), frequent extreme weather events, new LNG export capacity, and plans for lots of new gas-fired power generation — have been boosting the value of Gulf Coast storage. We emphasized, however, that while gas storage capacity is increasingly valued for its role in providing volume assurance and the opportunities created by high deliverability, that doesn’t necessarily mean storage values will be high enough to support the large-scale buildout of new facilities. Instead, the development of new storage capacity is likely to be very targeted — it will happen only where it has strong customer support and makes economic sense.

We’ve also been discussing the existing and planned Gulf Coast storage sites of several major players in that space. In Part 1, we looked at Williams, which recently expanded its storage assets in the region with the purchase of Hartree Partners and its 115 Bcf of storage in Louisiana and Mississippi, and at Enbridge, which has more than 100 Bcf of Gulf Coast salt-cavern storage and is planning a 6.5-Bcf expansion at its 35-Bcf Tres Palacios site. In Part 2, we turned our attention to three other companies with existing Gulf Coast storage and plans for more: Kinder Morgan, with more than 155 Bcf along or near its Texas and Tejas intrastate pipeline systems (including a new 6-Bcf salt cavern at its Markham facility); EnLink Midstream (recently acquired by ONEOK), which owns three storage facilities in Louisiana and one in North Texas; and Enstor Gas, which has 110 Bcf of storage capacity across four states (Alabama, Mississippi, New Mexico and Texas) and plans to increase the capacity of one of its Mississippi sites by 34 Bcf.