Natural gas storage prices in America have witnessed a noticeable recovery in recent years, which has encouraged the entry of new players into this activity, encouraged others to add expansions, and increased acquisition deals in the industry.
A report, seen by the specialized energy platform, indicated that increased demand for natural gas along the Gulf Coast of the United States has fueled storage activity in salt domes.
LNG exporters, power generation companies and pipeline operators are offering higher prices to store natural gas in America, for additional capacity and more flexible withdrawal in the south-central region.
At the beginning of this October, Enstor, an operator and owner of natural gas storage units in America, issued an open tender for the expansion of three storage caverns in central Mississippi, with a capacity of 22.4 billion cubic feet.
Instore wants to add 3 new storage caves, each with a capacity of 10 billion cubic feet, according to the platform. S&P Global Comedy InsightsThe day before yesterday, Friday October 13, 2023.
Gulf Coast Ad
Last October 2022, the American company Gulf Coast Midstream Partners announced the provision of natural gas storage services in the port of Freeport, Texas.
The company intends to provide natural gas storage services in America through the integrated storage system on the Texas Gulf Coast, and although the additional capacity that the company will provide amounts to 12 billion cubic feet, the high demand for storage is a motivating factor.
Industry experts believe that the renewed interest in natural gas storage activity in America is reminiscent of the golden era of activity during the first decade of the 21st century, when industry leaders added significant capacities before the emergence of shale gas.
“We are going back to where we were during the first decade of the 21st century,” said Edmund Knolly, a commercial leader at the port of Freeport in Texas, seen by the specialized energy platform.
He added that storage in salt domes is driving the rise in natural gas storage prices in America, which have recovered some of their recovery and increased from their low to medium level, recording 20 cents per “decatherm” (equivalent to one million British thermal units) per month, according to the type of service provided.
LNG tanker – Photo by Floneta
Long decades
Natural gas storage contracts in America have seen their duration modified to become longer in recent years, in light of increased competition among buyers for these capacities, according to Instore Vice President Peter Abt.
He said that developing additional storage caves in his company required long-term contracts of no less than 7 years, and up to 10 years, due to banks stopping financing projects that rely on short-term contracts.
Increased price volatility and increased intermittency in demand have led to renewed interest in natural gas storage assets in America, which provide buyers such as LNG exporters, power generation companies, utilities and pipeline operators with a short-term storage option, according to Abt.
Abt continued: “The demand for liquefied natural gas itself is volatile during one day,” according to statements monitored by the specialized energy platform.
He pointed out that the same applies to gas-burning power plants, as officials only operate them when renewable power plants stop, and purchasing from the spot market will be expensive and lead to loss.
The increase in natural gas storage prices in America and the willingness of buyers to pay an additional cost for storage capacities reveal the potential to multiply capacities by 5, 6, or more than 7 times annually, compared to rock caves and depleted fields used for storage, which do not exceed 3 times annually.
Even beyond the US Gulf Coast, the need for increased gas storage capacity and the ability to easily inject and withdraw has fueled numerous deals concluded in recent years.
Among these deals is Williams’ acquisition of MountainWest Pipelines in 2022, which enabled the former to acquire additional storage capacity assets estimated at approximately 56 billion cubic feet.
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2023-10-15 17:30:26
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