Natural gas customers benefit from the capability to store natural gas, primarily in underground storage facilities, until it is needed in response to market demands caused by weather or other events. There currently are nearly 400 underground storage facilities in the United States owned and operated by various companies.
Natural gas storage adds flexibility to the gas transportation network and has many uses. The natural gas transmission business is generally a seasonal business. Shippers want to inject natural gas into storage when demand is low – historically in the summer – and withdraw it during times of high demand – generally to meet peak heating demands in winter. (Natural gas from storage accounts for about 20 percent of the natural gas consumed in the winter). Shippers now sometimes use gas from storage in the summer to meet gas-fired electric generation needs.
The ability to store natural gas contributes to the high reliability of natural gas. Through sophisticated computerized information and transaction systems and flexible daily and intra-daily scheduling, shippers can use natural gas from storage to increase available supply in the system and maximize use of pipeline capacity during peak demand periods. The additional supply drawn from storage meets shippers’ needs and dampens the price volatility that might otherwise occur because of the tight balance of demand and supply within a particular market.
Like pipeline capacity, there are physical limits on existing storage capacity, and new and expanded gas storage facilities are needed. Still, new storage, alone, is not a complete answer to supply-demand imbalances now being experienced in the North American natural gas market. Also, in many cases, new storage cannot take the place of new pipeline capacity needed to link gas supply to consuming markets. For example, in some regions, such as the Northeast, the geology does not support the development of underground gas storage. By necessity, underground storage facilities serving this region will be many miles from the load centers and will be reliant on sufficient pipeline capacity to transport natural gas to consumers. Therefore, when pipeline capacity constraints become binding (i.e., when all existing pipeline capacity is being fully utilized due to cold weather or increased gas demand for electric power generation), natural gas in storage may not be deliverable to the consuming market unless a firm transportation path has been reserved.