Producing Region

Analyst estimates for this week’s Energy Information Administration (EIA) Weekly Natural Gas Storage Report before its release were rallying around an expectation of a 95-Bcf injection, according to the Wall Street Journal’s survey of storage analysts. The actual number reported by EIA yesterday (July 16, 2015) was a 99-Bcf injection, more or less in line with analyst expectations. But predictions may get a bit harder later this year. The EIA is preparing to redraw its US natural gas storage map and begin reporting inventory data in new regions later this year (2015). In August, prior to the launch of the revamped report, it will release a file with historical data for each of the new regions. The historical data will for the first time allow modelers to run their regressions and gather statistical information by which to rebuild their storage models designed to foretell the weekly EIA storage number. In the meantime, we did our own unscientific analysis of the regional breakdown and how it will change transparency in gas storage activity. Today, we examine storage capacities in the old versus new regions and potential impact on analyst visibility.

The biggest fundamental price indicator in the natural gas market -- Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report – is about to get a major makeover. The EIA is planning to split the US gas inventory data into five regions, from three macro regions currently. The idea has been floating out there for a while, but now it looks imminent, with a good chance it is rolled out before the gas winter season comes around in November. When it does happen, the increased granularity will vastly improve the transparency of natural gas storage inventory data on a weekly basis. But there’s another reason it will be a big deal when it happens:  It will break everybody’s storage scrapes and models. Storage modelers and forecasters will have their work cut out for them. In today’s blog, we break down the upcoming changes.

The natural gas trading market has been getting a lot of attention lately and not in a good way. A couple of weeks ago the Wall Street Journal published two articles describing the fact that traders have started to reduce their presence in natural gas storage.  At about the same time, Oneok, once a big player in energy services shut down its operation that had used natural gas storage and pipeline transportation capacity to provide those services to the industry.   With gas production still coming on strong, more gas being used for power generation and the possibility of serious LNG exports on the way, what’s the problem?  Today we look deeper into turmoil in the natural gas markets.

Storage, the great balancing mechanism of the natural gas market in North America is heading toward another evolution in its usage, flow patterns and economics.  Not too many years ago, natural gas storage was the hottest midstream investment opportunity going, expected to synchronize inbound flotillas of LNG imports with seasonal domestic demand.  Winter vs. summer price differentials were wide, prices were volatile and storage economics looked great.  When shale gas happened, those differentials evaporated along with storage economics.  Today another phase looms for natural gas storage as Marcellus and now Utica production ramp up on top of (or more accurately, underneath) the largest storage region in the world – the Northeast U.S.  This is a big topic with big implications.  So rather than jumping into the middle of the upcoming gas storage transformation, we will walk through a multi-part North America natural gas storage blog series -  its history and status, its challenges, who’s involved, and finally what could be in store going forward.  Today we’ll start with some natural gas storage basics.