After being relegated to the back burner during the shale boom, the natural gas storage market is showing signs of a comeback. Market participants are clamoring for storage solutions, storage values are rising, and storage deals and expansions are bubbling up. However, that won’t necessarily lead to a widespread build-out of new storage capacity like the one that transpired in the pre-shale storage heyday of the mid-to-late 2000s. That’s because the world has changed, and what’s driving storage values today is vastly different than what drove the last big capacity build-out. In today’s RBN blog, we look at the emerging developments in the storage market, what’s driving them, and the implications for Lower 48 storage capacity.
Storage has long been a critical balancing mechanism in the gas market. The role and value of storage, however, has changed dramatically since it was first built out starting in the middle of the last century. Today, it is at another inflection point. After wandering in the doldrums for much of the Shale Era, storage is re-entering the limelight. Underpinning the renewed interest in storage is the imperative to safeguard against the negative impacts of severe gas supply disruptions, particularly in markets like California and Texas, where consumers have felt the disastrous effects of temporary gas and power shortages, along with record-high prices, in recent years. [It’s telling that the California Public Utilities Commission (CPUC) voted unanimously August 31 to approve an increase of storage capacity at SoCal Gas’s Aliso Canyon facility to 68.6 Bcf, citing winter reliability concerns. The facility has a maximum capacity of 86 Bcf but has been capped at 41 Bcf or less as a safety measure ever since a massive leak was discovered at the site in 2015. See Los Angeles, I’m Yours and California Sunset.]
Fundamental shifts in the gas market have contributed to the focus on storage, primarily rising LNG export demand on the Gulf Coast but also the increased reliance on natural gas in the power sector and worsening pipeline constraints for getting gas supply to high-demand markets. And, reliability issues have been felt more acutely in the wake of extreme market events of the past few years, the two biggest influences being the specter of major weather-related market convulsions in the aftermath of Winter Storm Uri, the major ice storm that wreaked havoc on gas and electricity markets across Texas and the Midcontinent in mid-February 2021, and Russia’s war on Ukraine, which sent domestic gas prices soaring last year to pre-shale levels and the highest in 14 years. Moreover, as we said in The Final Countdown series, the gas market is headed for more turmoil in the coming years as the growing concentration of LNG export capacity on the Texas and Louisiana Gulf Coast will intensify competition for gas in the region, even as production growth and supply availability are challenged by pipeline constraints.
NATGAS Billboard is a daily, early morning email and report that provides an up-to-the-minute view of the natural gas market outlook, including storage injections/withdrawals and price. Billboard’s models incorporate pipeline flow data, weather models, electricity demand data and more.
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About the song
“Squeeze Box” was written by Pete Townshend and appears as the third song on side one of The Who’s seventh studio album, The Who by Numbers. Released as a single in November 1975, it went to #16 on the Billboard Hot 100 Singles chart. The song was originally written for a 1974 British television special featuring The Who that never came to fruition. It features crisp production from Glyn Johns and showcases Townshend's banjo playing in the solo section of the tune. Personnel on the record were: Roger Daltry (lead vocals), Pete Townshend (guitar, banjo, accordion, backing vocals), John Entwistle (bass, backing vocals), and Keith Moon (drums).
The Who by Numbers was recorded between April and June 1975 at Shepperton Studios in Surrey, England, using Ronnie Lane’s Mobile Studio. Produced by Glyn Johns, it was released in October 1975 and went to #8 on the Billboard Top 200 Albums chart. It has been certified Platinum by the Recording Industry Association of America. The Who bassist John Entwistle did the album’s cover art. Two singles were released from the LP.
The Who are an English rock band formed in London in 1964 by Pete Townshend, Roger Daltry, John Entwistle, and Keith Moon. They were originally called The Detours, and established themselves, along with the Small Faces, as progenitors of the maximum R&B sound preferred by the British mod movement in the mid-sixties. They have released 12 studio albums, 16 live albums, 27 compilation albums, four soundtrack albums, four EPs, and 58 singles. They have sold more than 100 million records worldwide. The iconic group was inducted into the Rock and Roll Hall of Fame in 1990, received a Lifetime Achievement Award from the Grammy Foundation in 2001, and were inducted into the UK Music Hall of Fame in 2005. Keith Moon died in 1978, and John Entwistle in 2002. Fourteen members have passed through the band since its inception. Pete Townshend and Roger Daltry continue to record and tour as The Who.
Comments
Nice to RBN coming aboard on a position we've long believed in.
Daily Henry Hub prices (spot and futures) have been extremely volatile over the past18 months Traders with storage in the region have likely profited from this. More storage would crush these trades, so unless one needs more storage for operational nedds at a cost that can be passed onto consumers the economic incentive apperars minimal.