Aliso Canyon

Six months ago, the U.S. West Coast natural gas market looked like it was in dire straits. A harsh winter had depleted stocks to the lowest level in over a decade and it seemed like the region would be hard-pressed to refill storage to a reasonable level, given limited and constrained pipeline options to flow incremental gas west. Instead, a combination of mild weather and operational changes eased demand and pipeline constraints, and Pacific Region storage staged a remarkable comeback this summer. In today’s RBN blog, we delve into how the region escaped a worst-case scenario heading into the heating season. 

Southern California is poised to have greater natural gas supply flexibility this winter, buoyed by improved access to local storage and the completion of repairs on an important inbound pipeline. Ongoing pipeline outages and maintenance had limited flows over the past few years, creating supply constraints that were then compounded by restricted access to the Aliso Canyon storage field. This led to major volatility in gas prices, which spiked as high as $39/MMBtu in July 2018. Recent repairs and regulatory changes aim to alleviate the situation and limit the likelihood of dramatic pricing moves during the 2019-20 winter season. Today, we provide an overview of recent developments in the SoCal gas market.

A perfect storm of hot weather, transportation constraints and limits on storage use recently sent natural gas prices in Southern California surging to the highest levels seen in that market going back to at least 2007. Spot prices at the SoCal Citygate hub averaged close to $40/MMBtu in late July and were again up over $20/MMBtu last week, levels that were several times higher than the national benchmark Henry Hub — and, for that matter, every other U.S. market hub — on the same day. Prices since then have retreated, but the whipsawing price action raises questions about what’s in store for SoCal this coming winter. Today, we analyze the factors behind the recent record prices and prospects for continued volatility at SoCal.

California and New England are two of the nation’s quirkier regions when it comes to energy –– and we mean that in the nicest way possible. So maybe it’s not too surprising that, at a time when the U.S. is just beginning a big push to export natural gas as LNG, the Golden State and “Yankeeland” (as some still refer to New England) are turning to imported LNG to help them deal with possible gas shortages during peak demand periods this coming winter. In neither case is liquefied natural gas considered to be a long-term fix, but –– for now at least –– LNG may be playing a role in keeping the pilot lights lit and the electric lights on. Today, we look at how the stockpiling and use of LNG can still make sense in a nation with an abundant supply of gas.