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Concept
Natural gas storage
Summary
Natural gas is a commodity that can be stored for an indefinite period of time in natural gas storage facilities for later consumption.
Gas storage is principally used to meet load variations. Gas is injected into storage during periods of low demand and withdrawn from storage during periods of peak demand. It is also used for a variety of secondary purposes, including:
Balancing the flow in pipeline systems. This is performed by mainline transmission pipeline companies to maintain operational integrity of the pipelines, by ensuring that the pipeline pressures are kept within design parameters.
Maintaining contractual balance. Shippers use stored gas to maintain the volume they deliver to the pipeline system and the volume they withdraw. Without access to such storage facilities, any imbalance situation would result in a hefty penalty.
Leveling production over periods of fluctuating demand. Producers use storage to store any gas that is not immediately marketable, typically over the summer when demand is low and deliver it in the winter months when the demand is high.
Market speculation. Producers and marketers use gas storage as a speculative tool, storing gas when they believe that prices will increase in the future and then selling it when it does reach those levels.
Insuring against any unforeseen accidents. Gas storage can be used as an insurance that may affect either production or delivery of natural gas. These may include natural factors such as hurricanes, or malfunction of production or distribution systems.
Meeting regulatory obligations. Gas storage ensures to some extent the reliability of gas supply to the consumer at the lowest cost, as required by the regulatory body. This is why the regulatory body monitors storage inventory levels.
Reducing price volatility. Gas storage ensures commodity liquidity at the market centers. This helps contain natural gas price volatility and uncertainty.
Offsetting changes in natural gas demands. Gas storage facilities are gaining more importance due to changes in natural gas demands.
Official source
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