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How Does Natural Gas Storage Effect Energy Trading?

Natural Gas Storage: Effects on Energy Trading

Natural Gas Storage: Effects on Energy Trading

This comprehensive report details natural gas storage systems including how they work, challenges of different systems, storage levels contributing factors, and low storage level mitigation tactics.

This report is for any industry professional who needs to understand how storage works, and how different factors affect the energy trading market.


Traditionally, underground storage is defined as the storage of natural gas in underground reservoirs at a different location from which is was produced. Storage locations are generally chosen close to concentrated market areas to satisfy market demand, stored mainly to guarantee the capability of the gas industry to meet seasonal changes in demand.

Underground storage uses are twofold: First, it adds to the industry's production and delivery systems, which in turn allows reliability in supply during periods of heavy heating gas demand. Additionally, storage can be used as a means of conservation to avoid waste (such as flaring) when production rates surpass marketability.

A natural gas storage facility has multiple uses as well -- to augment the peak availability of storing gas produced during periods of low demand; to cover unforeseen production facilities failures; and handle abrupt increases in demand.

Gas storage is a critical element of the natural gas industry. Producers, transmission and distribution companies, marketers, and end-users all benefit directly from the load balancing function of storage. Unbundling started a process that has fundamentally changed the way storage is used and valued. As an unbundled service, the value of storage in minimizing overall costs to consumers is increasingly being recovered at rates that reflect its value. Moreover, the traditional marketplace has differentiated between various types of storage services and has increasingly rewarded flexibility, safety, and reliability.

Natural gas, like most other commodities, can be stored for an indefinite period of time. The exploration, production, and transportation of natural gas take time, and the natural gas that reaches its destination is not always needed right away, so it is injected into underground storage facilities. These storage facilities can be located near market centers that do not have a ready supply of locally produced natural gas.

Natural gas storage plays a vital role in maintaining the reliability of supply needed to meet the demands of consumers. Historically, when natural gas was a regulated commodity, storage was part of the bundled product sold by the pipelines to distribution utilities. This all changed in 1992 with the introduction of the Federal Energy Regulatory Commission's (FERC) Order 636, which opened up the natural gas market to deregulation. Essentially, this meant that where natural gas storage was required prior to Order 636 for the operational requirements of the pipelines in meeting the needs of the utilities, it is now available to anyone seeking storage for commercial purposes or operational requirements.

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Pages: 66
Publication Date: August 2010
Publisher: Energy Business Reports
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