Fast-changing dynamics in Gulf Coast natural gas, electricity and LNG export markets are increasing the value of gas storage in Texas, Louisiana and Mississippi — or, more specifically, the merit of quickly injecting and withdrawing gas to respond to market swings. As a result, interest in developing gas storage projects with high “deliverability" rates has taken off, with billions of cubic feet of new storage capacity already coming online and a lot more in the works. In today’s RBN blog, we’ll begin a look at why so many market participants — power generators, LNG operators/offtakers, midstreamers, marketers and traders — are chasing the “extrinsic” value of gas storage and where the new storage projects are being built.
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A year ago, in our Squeezebox blog series, we examined the changing role and value of natural gas storage over the past several decades — before and after the deregulation and unbundling of the gas market in the early 1990s, then (in the mid-to-late 2000s) the advent of market-based storage rates and plans for LNG imports, and (through the mid-to-late 2010s) the Shale Era’s gas-supply abundance. That bounty — combined with a major storage overbuild — led to declining storage values and a virtual halt in the development of new storage capacity.
But things are changing. In the period between gas-market deregulation and gas-supply abundance, gas traders and marketers put cheap summertime gas into storage and removed it (typically at higher prices) during the winter months, thereby capturing storage’s intrinsic value. (They also learned to play the futures market against intrinsic spreads.) However, due in part to the storage overbuild we mentioned — some 1 Tcf of storage capacity was added between 2004 and 2014 — seasonal spreads collapsed and have only recently recovered somewhat. Today, even with that rebound in seasonal spreads, there’s less intrinsic value associated with storing significant volumes of gas from one season to the next than there was back in the heyday. However, with gas supply rising and an increasing proportion going to exports, there’s a growing anticipation that the market will need additional storage capacity, mostly to support downstream operations.
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About the song
“Ready to Let Go” was written by Brad Schultz, Daniel Tichenor, Jared Champion, Matt Shultz, Matthew Minster, Nick Bockrath, and John Hill (Cage the Elephant). It appears as the sixth song on Cage the Elephant’s fifth studio album, Social Cues. It was released as the first single from the LP in January 2019 and went to #1 on the Billboard Hot 100 Singles chart. It has been certified Gold by the Recording Industry Association of America. The striking and bizarre video for the song was directed by Cage the Elephant’s vocalist Matt Schultz. Personnel on the record were: Matt Shultz (lead vocals, rhythm guitar), Nick Bockrath (lead guitar, pedal steel guitar, lap steel guitar, keyboards, celeste, cello), Daniel Tichenor (bass), Matthew Minster (piano, keyboards, vibraphone, backing vocals), Brad Shultz (rhythm guitar, keyboards) and Jared Champion (drums, percussion).
Social Cues was recorded in 2018 at Battle Tapes Recording, Blackbird Studio and Sound Emporium in Nashville and Village Recording Studio in Los Angeles. Produced by John Hill, the album was released in April 2019 and went to #21 on the Billboard 200 Albums chart. It won the award for Best Rock Album at the 62nd Annual Grammy Awards. Four singles were released from the LP.
Cage the Elephant is an American rock band formed in Bowling Green, KY, in 2006. The band relocated to London in 2008 before their debut album dropped. They have released six studio albums, two live albums and 17 singles. The band continues to record and tour. Their latest studio album, Neon Pill, was released in May 2024.
Comments
Natural Gas storage was never primarily about capturing the seasonal swing in prices. It was about keeping the lights on, not freezing your tucus off, and not having to shut down your manufacturing facility when the north wind blows and the snow flies.