Category Large Energy Storage Systems handbook

Gas Storage and CO2 Sequestration

A number of technologies developed by the gas storage industry in the United States and Europe have potential application to CO2 sequestration. The most utilized method of storing natural gas in geologic formations is injection into

Develop better understanding of maximum delta temperature that casings can withstand without failure of cement or joints.

Improve corrosion management methods to enhance availability (especially bacterial control).

Develop new tools (e. g., logging) and techniques to verify integrity of casing strings.

Research improvements in deliverability by mechanical means such as new coil tubing tools.

Find new approach to handling produced water.

Develop cost-effective means to remove water at end of withdrawal season. Develop ways to delay or prevent "watering off...

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Gas Storage Technology Development

Gas storage technology development has been conducted continuously since the evolution of the first storage fields. Better understanding of reservoir

TABLE 8.1

New North American Gas Storage Requirements

Incremental Working Gas Capacity

2004 to 2008 (Bcf)

2009 to 2020 (Bcf)

Total (Bcf)

Western Canada

30

40

70

Eastern Canada and

36

74

110

Michigan

Midwest

60

60

New York

10

56

66

Pennsylvania and West

33

90

123

Virginia

Gulf Coast

72

5

77

West Coast

21

78

99

Other

10

37

47

Total

212

439

651

Source: Base case from At the Crossroads: Crisis or Opportunity for Natural Gas? Energy and Environmental Analysis Inc. With permission.

responses to gas storage conditions, mechanical is...

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Evolution of Storage

Storage has been and continues to be an important element in the U. S. natu­ral gas supply portfolio. In the future, the value of storage will be driven by new market forces and paradigm shifts in the magnitude of short-term and seasonal gas price volatilities. The relative values of storage components will change. Seasonal storage capacity will become more valuable (wider mag­nitude of time spreads). Injection capacity also will become more valuable (reflecting need to balance large LNG vaporization send-out against vari­able and seasonal demand). Short-term deliverability may become less valu­able because of aggregate increases in short-term and peaking deliverability from new LNG storage/vaporization facilities...

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Economics of Storage

Underground natural gas storage presents a variety of economic justifica­tions, depending on the perspective of the entity attempting to value a facil­ity or service. In traditional rate making, the value attached to natural gas storage service was determined by the avoided cost economics of alternatives such as no-notice service. While avoided cost still plays a role for utilities, the value of natural gas storage is now evolving to valuing the services realized from expanded gas sales.

In general, as we see in the Figure 8.7 graph, high gas prices are typically associated with low storage periods...

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Customer Segments Summary

Order 636 caused little change in the gas business. The same producers are selling gas in the market. The same pipelines are transporting it to the same end users. Some issues have changed. Who controls the pipe­line capacity? How is it billed? Who is selling the value-added services available from storage (or comparable paper constructs sometimes called "virtual storage")? What are the rules for trading gas, pipeline, and storage capacity? Most importantly, who is ultimately responsible for gas service at the residential level? State level unbundling is challenging these factors and may constitute a far more compelling issue for the evolution of the storage industry over the next 10 years than federal regulatory change...

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Producers

In the past, producers acted as limited participants or nonparticipants in gas storage and marketing, primarily because of the corporate culture that per­vades most major players that categorize their primary business as explora­tion and production (E&P). The E&P cultural issue is compounded by the fact that storage operators rarely earn more than a 15% return on after-tax equity employed, and E&P firms believe that their projects should have much higher hurdle rates to accept the high failure rate encountered in the drilling business. A few producers are examining storage as an adjunct to developing affiliate marketing organizations...

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Interstate Pipelines

Storage has been a significant organizational function of interstate pipeline com­panies for many years. Open access and the elimination of merchant gas sales and services caused pipeline storage areas to effectively become "warehouse" operations. Order 636 allowed the pipelines to retain only such storage as required for operational integrity. Several major pipeline systems in the United States operate without the benefit of storage services for shippers or gas controls...

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Intrastate Pipelines

Intrastate pipelines have emerged as the most aggressive targets in the pipe­line asset resale market. The value of storage for intrastate pipelines, whether procured as an equity investment or as a service lease, is essentially identical to the values set by large suppliers and aggregators. Value is defined by the contribution that the storage service brings to the gas sales function. This includes the value available to suppliers from swing supply sales, emergency back-up sales, balancing, no-notice service sales, and incidental income from arbitrage and peaking sales.

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