Natural gas storage

Generally, a storage facility’s deliverability rate varies directly with the total amount of gas in the reservoir.

Using such a facility that meets the above criteria is economically attractive because it allows the re-use, with suitable modification, of the extraction and distribution infrastructure remaining from the productive life of the gas field which reduces the start-up costs.

Depleted reservoirs are also attractive because their geological and physical characteristics have already been studied by geologists and petroleum engineers and are usually well known.

Consequently, depleted reservoirs are generally the cheapest and easiest to develop, operate, and maintain of the three types of underground storage.

A number of factors determine whether or not a depleted gas field will make an economically viable storage facility: Aquifers are underground, porous and permeable rock formations that act as natural water reservoirs.

[4] Once created, a salt cavern offers an underground natural gas storage vessel with high deliverability.

Consequently, salt caverns cannot hold the large volumes of gas necessary to meet base load storage requirements.

There are also other types of storage such as: Liquefied Natural Gas (LNG) facilities provide delivery capacity during peak periods when market demand exceeds pipeline deliverability.

As a liquid at approximately −163 °C (−260 °F), it occupies about 600 times less space than gas stored underground, and it provides high deliverability at very short notice because LNG storage facilities are generally located close to market and can be trucked to some customers avoiding pipeline tolls.

Gas can be stored above ground in a gasholder (or gasometer), largely for balancing, not long-term storage, and this has been done since Victorian times.

Interstate pipeline companies rely heavily on underground storage to perform load balancing and system supply management on their long-haul transmission lines.

Intrastate pipeline companies use storage facilities for operational balancing and system supply as well as to meet the energy demand of end-use customers.

The consuming east region, particularly the states in the northern part, heavily rely on stored gas to meet the peak demand during the cold winter months.

Due to the prevailing cold winters, large population centers and developed infrastructure, it is not surprising that this region has the highest level of working gas storage capacity of the other regions and the largest number of storage sites, mainly in depleted reservoirs.

In addition to underground storage, LNG is increasingly playing a crucial role in providing supplemental backup and/or peaking supply to LDCs on a short term basis.

[citation needed] Although the total capacity for these LNG facilities does not match those of underground storage in scale, the short term high deliverability makes up for that.

Storage in this area is mostly used to allow domestic and Albertan gas, coming from Canada, to flow at a rather constant rate.

FERC defines market power as "..the ability of a seller profitably to maintain prices above competitive levels for a significant period of time".

Commission Chairman Joseph T. Kelliher observed: "Since 1988, natural gas demand in the United States has risen 24 percent.

While construction of storage capacity has lagged behind the demand for natural gas, we have seen record levels of price volatility.

This ruling aims at opening up two approaches for developers of natural gas storage, to be able to charge market-based rates.

It would allow an applicant to request authority to charge "market-based rates even if a lack of market power has not been demonstrated, in circumstances where market-based rates are in the public interest and necessary to encourage the construction of storage capacity in the area needing storage service and that customers are adequately protected," the Commission said.

In addition significant expenses are accumulated during the planning and location of potential storage sites to determine its suitability, which further increases the risk.

As a general rule of thumb, salt caverns are the most expensive to develop on a volume of Working Gas Capacity Basis.

These factors include the amount of compressive horsepower required, the type of surface and the quality of the geologic structure to name a few.

For developers seeking to study the feasibility of building a storage facility, they would typically look at the long-term price spreads.

The extrinsic valuation reflects the fact that in such facilities, say salt cavern formations, a proportion of the space can be used more than once, thus increasing value.

Usually when prices are high during the early months of the refill season (April–October), many users of storage adopt a wait and see attitude.

Research being conducted by the US Department of Energy is showing that salt formations can be chilled allowing for more gas to be stored.

[2] This storage facility consists of installing a steel tank in a cavern in the rock of a hill and surrounding it with concrete.