To meet their target storage inventory levels for the start of the 2013/14 winter, many local distribution companies will need to increase the amount of natural gas they have in underground storage fields this summer compared to last summer, according to US Energy Information Administration data.
Total injections this summer will be similar to those in 2008-11 but much higher than in 2012. Two key factors affected injections during summer 2012: starting inventories and gas use for power. Injections were historically low last summer because the warmest winter in 60 years left end-of-season inventories at record highs. Moreover, the lowest spring natural gas prices in 10 years boosted natural gas use for electricity generation, as generators substituted natural gas for coal by changing the dispatch order of their generation plants.
As a result, working natural gas in storage is expected to total about 3,800 billion cubic feet on October 31, 2013—the nominal end of the summer injection season. Injections of natural gas into storage often continue into November, depending on weather and storage levels at the time, the EIA says.
A colder-than-normal March this year contributed to a late winter drawdown of natural gas stocks in both the East and Producing regions, but inventories in the contiguous United States were still 10 percent above the 2007-11 average (see chart below). End-of-March stocks by storage region were: East Region (661 Bcf); West Region (344 Bcf); and the Producing Region (705 Bcf). Forecast consumption of natural gas for power generation in 2013 is below year-ago levels, but it is still above the 2007-11 average, which limits the degree to which this year’s projected injections will exceed historical levels.
According to EIA figures released in April, the amount of natural gas used to generate electricity by March this year is significantly lower than last year at that time, when low natural gas prices led to significant displacement of coal by natural gas for power generation.
By late March, wholesale natural gas prices at the Henry Hub trading center were back to $4 per million British thermal units, a dollar or so higher than a year ago. In response, electricity generators used 16 percent less natural gas in March 2013 compared with March 2012. Coal recovered some market share as as result of the natural gas price rise.