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Blank Space - Is Another Build-out of Natural Gas Storage Capacity Just Ahead?

If you’re a relative newcomer to the energy industry, the subject of natural gas storage might make your eyes glaze over — the sector is often treated as a backwater by traders and investors focused on liquid hydrocarbons. But it wasn’t always so. In the decades leading up to the early 2000s, the U.S. gas market underwent a series of fundamental changes, each spurring the development of new storage capacity, first in the Northeast, then the Midwest, and finally along the Gulf Coast. Along the way, the primary use of storage — balancing seasonal swings in gas demand — remained consistent, but there was also a wild-and-woolly period in the mid-2000s that was rife with meme-stock-like trading frenzy. It’s hard to say for sure, but we may be on the verge of needing still more gas storage capacity. In today’s blog, we’ll discuss the history and nature of U.S. natural gas storage to give context on what the future might hold.

It may come as a surprise that the origins of natural gas storage in North America began not in the U.S., but in Canada. It was in 1915 that a depleted natural gas well in Ontario was reconditioned into a gas storage facility. But as much as we love poutine and maple syrup, we’ll save our blog on Canadian storage for another day. Today we are focused on U.S. storage. After proof of concept in Ontario, the depleted Zoar gas field in New York was repurposed to help meet the wintertime gas needs of nearby Buffalo in 1916. The Zoar field is now the oldest operating underground gas storage facility in the world, and a testament to the durability of these operations.

Following the lead of the Zoar field, depleted wells were the first and most prominent form of natural gas storage and, even today, repurposing inactive or uneconomic gas wells continues to be the most popular option, accounting for over 80% of the gas storage sites in the U.S. This is a go-to approach for good reason: this type of “container” has a proven record of holding gas for millions of years, so why can’t it be used to receive and store gas for another century or two? Further, these sites generally have remaining pipelines and infrastructure surrounding from their producing days that can be used to help move gas in and out. Other benefits are that the remaining uneconomic producible natural gas in the well can serve as part of the base or “cushion” gas, and that if all the inventory isn’t used by spring the gas can stay in the reservoir — that’s not the case with another storage-facility type, as we’ll get to in a moment.

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