Should natural gas be stored in the production area, market area, or both?
The market area, where most natural gas is currently stored, plays a vital role in the efficient distribution of natural gas. But in the future, production-area storage will become increasingly important as the supply and demand for natural gas become more evenly aligned.
. . . in the future, production-area storage will become increasingly important as the supply and demand for mtural gas become more evenly aligned.
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Market-area storage reservoirs-large-volume reservoirs into which gas can be injected two hundred days a year and withdrawn one hundred days a year-are a surrogate for pipeline capacity and provide an opportunity to buffer seasonal price swings. However, there are some things that market-area storage cannot do.
For example, market area storage cannot compensate for supply interruptions. On a peak day, 40 percent to 65 percent of all gas deliveries must be supplied from the production area. The physical characteristics of the pipeline grid and storage reservoir characteristics preclude meeting peak loads with only market-area storage. During the infamous winter of 1989, it was not the cold weather in the market area or a failure of market-area storage that caused the problem: The crisis developed when it got cold in the production area and gas from the production area began to freeze off or be diverted to high-priority intrastate markets. Additional market-area storage would help, and some will be built; but this is not the most efficient economic solution, for it wastes the existing investment in the pipeline grid as well as firm transportation (FT) demand payments. Reservoir storage, which is typical of the market area, also requires LDCs to take enormous, unnecessary inventory price risks.
Understanding the interaction between supply inter-Larry W . Rickle b chairman and chief executive officer, TejasPower Corporation, Houston.