In February of 1996, temperatures in the northeast and midwest United States plunged below zero for several days, causing a surge in natural gas demand for residential and commercial heating. The gas industry's success in meeting this surge was due to the reliability of the gas delivery and storage system.
But, will this system continue to meet peaks in demand into the next century?
The natural gas market is a $90 billion per year industry, with over $50 billion spent in 1995 for the purchase of natural gas, including imports and liquefied natural gas. Interstate pipeline capacity charges and local distribution company capacity tariffs exceed $32 billion.
Federal deregulation has imposed fundamental changes in the natural gas industry structure. A key aspect of the Federal Energy Regulatory Commission (FERC) Order No. 636 deregulation is the unbundling of gas transportation service from the supply function, which can no longer be included into the supplier rate base. The gas pipeline industry must now provide each of their services individually and at increasingly competitive prices.
Gas storage is the primary means of managing fluctuations in supply and demand, and is an essential component of an efficient and reliable interstate natural gas transmission and distribution network. Gas storage is used for two primary purposes: to meet seasonal demands for natural gas (base-load storage), and to meet short-term peaks in demand (peaking storage), which can range from a few hours to a few days.
To ensure that adequate natural gas supplies are available to meet seasonal base-load customer requirements in winter, industry injects large amounts of gas into underground storage reservoirs from April through October. During these nonheating season months, gas demand declines as temperatures rise. During the heating season, industry supplements pipeline capacity from the producing regions with supplies from storage to meet demand.Gas withdrawn from working gas storage can supply up to 30 percent of daily gas demand in winter months.
Storage enables greater system efficiency by allowing more level production and transmission flows throughout the year. Because of this leveling effect, storage decreases the amount of new transmission pipeline needed to connect the producing regions to the marketplace by 50 percent. The pipeline company itself can avoid the need to expand transmission capacity from production areas. This can be achieved by using or establishing new storage facilities in market areas where there is a strong seasonal variation to demand.
End-use customers gain from such system efficiency with reduced overall costs of service. Storage also allows continuous service even when production or pipeline transportation services are interrupted. In 1992, for example, storage enabled continuous service despite damage to gas production facilities caused by Hurricane Andrew.
Industry will need to expand the existing gas storage system to meet anticipated future demand for gas, which is forecasted to increase by as much as 6 Tcf by 2010 and 10 Tcf by 2020. This rising demand raises concerns about the system's ability to meet peak requirements in the future.
Gas Storage Must Address Shifts in Supply and Consumption Natural gas is distributed to virtually every region of the country through an extensive system made up of more than 1.3 million miles of pipeline, meters, compressor stations, and approximately 410 storage reservoirs. The gas industry currently has the capability to deliver approximately 75 Bcf per day during peak periods.
In 1997, total working gas storage capacity from U.S. gas storage sites was 3.8 Tcf. These sites are heavily concentrated in and near major eastern and mid-continent markets.
The significant shift in natural gas supply and consumption patterns expected by 2010 will create a need for new natural gas pipeline transmission and storage facilities. With the anticipated decline in production from the southwest central region, additional transmission and storage capability will be required to move gas from the Rocky Mountains and Canada to neighboring regions and to expanding markets in the northeast, southeast, and California.
The Role of DOE
The gas storage industry currently spends over $100 million annually for deliverability enhancement ($80 million for deliverability revitalization and $20 million for gas storage field infill drilling). New and novel advanced stimulation and revitalization technologies could reduce these maintenance costs by 20 percent.
In sharp contrast, less than $3 million per year is spent on gas storage technology research and development ($1.6 million by Gas Research Institute and $1 million by DOE). DOE and GRI projects focus on high-priority technology needs as identified by industry.
The Gas Industry RD&D Initiative Group, in its January 1998 report, Funding Recommendations to the U.S. Department of Energy for Natural Gas Research, Development, and Demonstration, highlighted transportation and storage needs as part of a broad program of technology developments recommended for government support. Specific storage needs cited include:
Engineering techniques that can revitalize storage well deliverability; and
Accurate, real-time metering and measurement flow technology.
The National Petroleum Council, in its 1995 study, Research, Development, and Demonstration Needs of the Oil and Gas Industry, ranked technologies for well deliverability restoration and reservoir management as high priority needs in both the short- and long-term.
DOE's Gas Storage Program activities also build on the findings and recommendations in the NPC report, The Potential for Natural Gas in the United States (1992); the Federal Energy Regulatory Commission/DOE study, Natural Gas Deliverability Task Force Report (1992); the Administration's Domestic Natural Gas and Oil Initiative (1993); and the report of the Task Force on Strategic Energy Research and Development (1995).
Joint DOE-industry projects are selected for their potential application throughout the gas industry. Current technology development efforts include:
Novel and advanced fracture stimulation technologies and improved remediation treatments that will increase storage reservoir deliverability and help to offset the reported 5.2 percent annual decline in deliverability;
The development of improved gas flow metering and energy measurement technologies that will provide real-time, automated monitoring of pipeline gas flow and energy content, increasing system deliverability, and optimizing gas sales to customers; and Advanced storage technologies that will meet the specific storage needs of new and growing industrial and power generation markets, specifically the short-term or hourly requirements of the power generation sector.
Another way that DOE maximizes its RD&D investments is through technology transfer. Technology transfer is a key component of all DOE projects and assures that RD&D results are shared among industry and other stakeholders.
Potential Benefits Development of advanced technologies that meet industry needs would result in a more efficient natural gas storage system and benefit both industry and consumers.
The gas storage industry would benefit through increased deliverability, decreased deliverability revitalization costs, and increased operating efficiency.
Local distribution companies would gain from improved system reliability and flexibility. Industrial and power generation end-users would benefit from advanced storage concepts (i.e., access to gas storage currently not available), while residential customers would benefit from lower costs for service.
An enhanced gas storage system would also contribute to increased use of clean burning, abundant domestic natural gas resources, helping to meet our Nation's energy and environmental goals.
Source: United States Energy Information Ad
© 2000 Mena Report (www.menareport.com)
