2018 U.S. Deep Freeze: Largest Weekly Draw on Natural Gas Storage… Evah!

Guest post by David Middleton

Well… It’s the largest draw “on record”… Since 2010…

NatGas_Draw

Weekly change in natural gas storage (bcf). US EIA

Glossary

  • Mcf :  Thousand cubic feet ~ 1 million btu (mmbtu)
  • Bcf : Billion cubic feet = 1 million mcf ~ 1 million mmbtu
  • Natural gas storage: underground storage facilities for natural gas.  Often old salt mines, depleted oil & gas fields.  Gas is injected during warm months and withdrawn during cold months.

Summary

Working gas in storage was 2,767 Bcf as of Friday, January 5, 2018, according to EIA estimates. This represents a net decrease of 359 Bcf from the previous week. Stocks were 415 Bcf less than last year at this time and 382 Bcf below the five-year average of 3,149 Bcf. At 2,767 Bcf, total working gas is within the five-year historical range.

US EIA Weekly Natural Gas Storage Report

If natural gas was sea ice, it would be on the verge of disappearing forever (/Sarc)…

ngs

“Note: The shaded area indicates the range between the historical minimum and maximum values for the weekly series from 2013 through 2017. The dashed vertical lines indicate current and year-ago weekly periods.” US EIA

The record draw on natural gas storage was driven by record-breaking natural gas consumption… [See correction at bottom of post]

main

“Estimated U.S. natural gas demand on January 1, 2018 reached 150.7 billion cubic feet, surpassing the previous single-day record set in 2014, according to estimates from PointLogic.” US EIA

The record-breaking natural gas demand was driven by… Wait for it… FRIGID COLD temperatures over most of the continental United States…

20180104_itn1

“Between December 24, 2017, and January 3, 2018, daily temperatures in the Lower 48 states averaged 27° Fahrenheit (F), which was 9°F lower than the 30-year (1981–2010) average for the same period. Daily temperatures reached a maximum departure from normal of 18°F below normal on January 1, 2018.” US EIA

Which has all led to a sharp spike in spot market natural gas prices… Can you say “hockey stick”?

20180104_ngsp

Henry Hub Natural Gas spot market price ($/mmbtu ~ $/mcf) US EIA

This is exactly what we should have expected from Gorebal Warming!

Good thing that most of our coal-fired capacity survived Obama’s War on Coal!

Unfortunately, FERC rejected the proposed resiliency pricing rule for coal and nuclear power plants… So let’s hope the Marcellus holds up!

Correction

The record-breaking weekly storage draw and spot market price spike were the direct result of the deep-freeze.  The record consumption was due to a combination of factors: increased gas-fired electricity generation, exports and to a lesser extent, the deep freeze.  I should have structured the post better.

 

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75 thoughts on “2018 U.S. Deep Freeze: Largest Weekly Draw on Natural Gas Storage… Evah!

    • The Marcellus is fracking YUGE. It accounts for about 85% of the growth in US shale gas production.

      But, it will eventually peak.

      • The Marcellus is only one of several shale formations containing hydrocarbons in that region, now commonly referred to as the Appalachian Basin, with the larger (in area, at least) Utica being almost as prominent.
        Several shallower formations – collectively called the Upper Devonian – actually produce quite a bit and are in the very early stages of development.

        FWIW, the intraday spot gas price at Transco Zone 6 (New York City) hit $175/mmbtu with the day’s average $140. All due to pipeline scarcity as several other regional transfer prices were in the $4 range.

        These prices shattered previous records.

    • David Middleton,

      When will the peasants revolt in New York, overthrow the Marxists, and open up NY for drilling? Wish the few measly acres of mineral rights my family has in NY were in PA. I might at least be able to help the kids with college.

      • D*mn, guess they need to find jobs. :)

        I live in SE Virginia and we just went through a heck of a cold spell, but it was in the 60’s today. I’m assuming it was a lot colder in NY, and if that’s not enough to change their minds, I guess nothing will.

  1. That sharp spike is regional. Take a look again at the EIA data, it is almost all driven by the North East. The issue isn’t with the draw or even the cold (this week is back to normal, next week will be above average) it is the pipeline bottlenecks.
    My guess is that the installed capacity of coal is going to decline faster than the EIA projections over the next couple years. Some of the oldest and smallest plants (read – least economically efficient) have already closed, but even the larger ones are struggling. The price difference between coal and Nat Gas is ~50%, but Nat Gas for baseload is 50% more efficient than coal, so per kWh Nat Gas costs the same and it provides more flexibility in response to market dynamics. My guess is that many of the coal plants are going to keep running until they need maintenance and then be retired – kind of like running a car into the ground. You keep driving it until the day the mechanic says “you need a new transmission.”

    • Henry Hub is in Louisiana. Yes… The spike will be very short term and it’s a spot market spike. February futures are holding in the $3/mcf range.

      In the “no CPP” scenario, EIA has coal-fired capacity remaining fairly steady from 2025-2040. A slight improvement in utilization rate, drivien by higher gas prices, could actually lead to an increase in coal-fired generation over than period.

      The above projections are based on the US EIA’s fairly conservative estimates of future natural gas prices and current forecast of coal-fired power plant closures with no regulatory relief other than the cancellation of Obama’s Clean Power Plan. If coal utilization rates rise back to 65-70%, the rate of plant closures will very likely slow down.

      https://wattsupwiththat.com/2017/08/07/coal-plants-keep-closing-on-trumps-watch-and-why-it-doesnt-matter-to-the-resurgence-of-the-american-coal-industry/

      • This is a dubious EIA projection about coal. Researched it back in 2014 but the details didn’t fit draft essay Clean Coal. According to FERC, the average of US coal generators is 42 years and the median retirement age is 48. Looking at the plant capacity/age distribution, it would appear that about 30% of coal generating capacity will be retired by 2025. There may be a few HeLe USC coal replacement plants built because FERC reports some planned (the US only one, Turk, came on line in 2012), but most will be CCGT fired by natural gas. Lower capital, faster to build, more efficient and more flexible. LCOE (Climate Etc post True Cost of Wind) was just under 10% below below coal (about $5/Mwh at the time the calculations were run).

      • Under the “Coal-fired electric power plants” tab you can download the latest (2016) XLS of all retired, operable and planned coal-fired plants. Eache entry includes the operable start year and planned or actual retirement date.

        https://www.eia.gov/coal/data.php#

        The EIA forecast (with and without CPP) can be accessed here:
        https://www.eia.gov/outlooks/aeo/data/browser/#/?id=9-AEO2017&region=0-0&cases=ref_no_cpp&start=2015&end=2050&f=A&sourcekey=0

    • Due to a blown NOAA forcast for a mild winter the northeast didn’t have adequate stocks of oil or propane. For many there is now a two week wait for delivery. I can wait as I also burn wood, but many are facing frozen pipes. You now cannot find an electric heater at any of the local hardware stores.

      Joseph D’Aleo described the advice he got when he went to the office of the oil delivery people (because they wouldn’t answer the phone.) He went and got a five gallon can of diesel at the gas station and used it as heating fuel. The problem is that now there is a shortage of diesel.

      The current thaw is a blessing.

    • You hit the nail on the head, chad. The newest combined cycle generating units are almost twice as efficient as coal units and need a lot fewer people to run them. So if the prices per mmBTU are about the same, guess who wins the market? And no sane CEO would elect to build a new coal plant even if the economics were favorable due to the regulatory uncertainty.

  2. This is exactly why I have never been in favor of exporting the “bountiful natural gas.” I see stored stocks is down to start the year, probably not too different from the amount exported, and I don’t think this year is going to be an “outlier.” I think winters are going to continue to get worse, not warmer, so what we see happening is typical of our society – the rich get richer, and the poor pay for it on those “spot market spikes” that spike it up their, well, let’s not go there.

    • Come on Tom, when is the last time you paid the spot price for Natural Gas? We don’t export that much, and honestly if we did then we would displace the need by using more coal for electricity generation. However, as I said above the problem was a pipeline bottleneck. Even if we were exporting nothing we would have the bottleneck. The bottleneck was a known problem exposed during the great polar (bear) vortex of 2014, and nothing has been done to alleviate the issue. Infact, shutting down Nucs in the North East and replacing that with Nat Gas fired generation without increasing pipeline capacity has made the problem worse.

      • Yep. With or without LNG exports, the price would have spiked.

        Unfortunately NIMBY’ism in New York & New England makes it very difficult to expand pipeline capacity there.

      • Re: impact of pipelines/deliverability …
        While the dramatic price increase in spot gas was going on, residential Ohio customers of Dominion Energy paid $3.07/mmbtu with the price DROPPING to $2.74/mmbtu next week.
        Supply is abundant – and will remain so for decades – distribution, not so much without pipe to get it where it needs to go.

      • “Abundant” is a relative term. But, I generally agree supply will be more than adequate for at least the next couple of decades.

      • Pipeline capacity into the Northeast is the BIG issue. Really hard to me to see how you can have untold millions of CH4 in the ground not that far away but zealots won’t allow pipelines be built to get it to where people are freezing.

        I’ve always thought people will be totally apathetic about just about everything until they are discomforted.. hungry, thirsty, hot or cold. Then they scream like hyenas.

        Well, the one other discomfort is about to be upon them.. their utility bills. Let’s see how that goes over (or who gets the blame!).

      • rbabcock,

        I am guilty of being NIMBY about a pipeline, because the pumping station would have roared like a jet fighter, twenty four hours a day, just down the street from my house. And anyway, I burn wood that I grow on my own farm.

        Those pumping stations are incredibly loud. Having one next door would have destroyed the quality if life for me, and spoiled the Childcare I run, which is all about getting children “back to nature”. Also the only reason they planned to detour up through New Hampshire was because NIMBY people in Massachusetts wouldn’t upgrade a pipeline that already existed.

        Just thought you might be interested in the views of an old, grumpy, anti-progress geezer.

      • Most politicians are so utterly incompetent that they should not even opine on energy policy, let alone formulate it.

        They have compromised our energy systems with intermittent “green energy” schemes that are not green and produce little useful (dispatchable) energy.

        We are governed by scoundrels and imbeciles.

        https://wattsupwiththat.com/2017/12/28/the-end-of-the-end-of-winter/comment-page-1/#comment-2702794

        [excerpted]

        In the longer term, I expect moderate global cooling, as was experienced from ~1940 to ~1975, to resume. I predicted in 2002 that this moderate multi-decadal global cooling would re-commence by ~2020 to 2030, and this prediction is looking increasingly probable, since solar activity has crashed in SC 24 (and will probably also be very low in SC25).

        I hope to be wrong about this last prediction – both humanity and the environment suffer in a cooling world. This human suffering will be exacerbated by the actions of our corrupt/imbecilic politicians, who have greatly compromised our electrical grids due to their over-reliance on intermittent wind and solar energy systems.

        Best, Allan in Calgary

    • I personally do not think we will ever export copious quantities of US LNG. We will mainly sell pipeline gas to Mexico. Russia is building another major pipeline to Europe so that market will become unattractive. Both Qatar and Australia have already made major LNG investments, and both are better positioned to serve Asia by sea than Cheniere from the US Gulf. (China, Japan, Korea, Singapore, maybe Malasia. indonesia, India and Pakistan have coal.) And Russia has a new LNG facility in Yamal plus 10 new ice breaking LNG ships to also serve Asia/Europe via the northern route.

      • If you take a look at some of the numbers, particularly cost and capacity, you may be surprised.
        Yamal cost $27 billion and ships 16 million tonnes per year (mtpa).
        Gladstone – Queensland – cost about $60 billion (all 3 operations), ships about 26 mtpa, and is sourced by Coal Seam Gas.
        In contrast, Tellurian’s recently announced Driftwood project will cost $16 billion with 27 mtpa in incremental, modular construction.
        Biggest disruptor yet, perhaps, is the new generation of floaters from Norwegian outfit, Golar.
        They plan on putting 4 FLNGs off Louisiana with company called Delfin.
        Cost about $6 billion with 13 mtpa capacity.
        There is a very real possibility that Australia could import US LNG into Melbourne in a few years via a FSRU floating regassifiers planned by AGL.
        The US will have a strong position a vis cost in the future.

      • Yep. We currently have a significant cost advantage over the rest of the world. Even if we raised exports to 30 bcf/d over the next decade, we’d still probably be in the driver’s seat.

      • At the very least, the US has greatly reduced Russia’s ability to use
        Nat Gas supply as a weapon.

  3. CAUTION: It would be very dangerous to burn any climate papers without first removing the actual print as burning animal dung can be extremely hazardous to the lungs.

  4. Glancing around the internet, I see California, and neighboring states, don’t have many large gas storage facilities for short term emergencies. Of course, the milder climate may mean they do not need them. Yet. Someone is going to make a lot of money when they do.

    • The storage isn’t for short term emergencies. Its purpose is to maintain production and price stability. Natural gas prices would spike every winter and collapse every summer without storage.

  5. Back in January of 2011 (If I recall correctly.) I was working at a coal fired power plant in the Texas panhandle when the temperature dropped into record breaking negative numbers. Fought frozen pipes in my apartment.
    Because of interruptible gas contracts several NG fired power plants in the area had their gas curtailed. Gas company shifted its supply to critical demands. One of the coal fired units was down for an outage. Several dozen diesel fired space heaters were quickly purchased and placed around the operating unit to keep critical sensing lies from freezing.
    The customers and politicians don’t appreciate what hard work and dedication goes into reliable power generation, T&D.

    • Several coal plants went offline because their water pipes froze. Pipeline pressures dropped. And we had heavy snowfall in Dallas.

      We had rolling blackouts in Dallas and a foot of snow that week. Of course, “Jerry World” and the Super Bowl venues were exempted from the blackouts.

      • Totally OT but, just out of sheer curiosity (I am a non-native speaker of your idiome), what is the problem at WUWT with the pronunciation of “ever”?

      • I always enjoy your posts here. I think two better words may be that I appreciate them and learn from them.
        This post is two simplistic. Yes cold had a role to play, I agree but other issues were involved.

      • The record weekly storage draw and price spike were entirely due to the cold.

        The record consumption relative to 2014 was due to a combination of the cold, exports and gas-fired electricity generation.

        I could have structured the post better than I did.

      • Francois@1:26PM,
        We in the Southern part of the US are pleased to see “ever” being pronounced
        correctly.

    • Jerry Henson on January 12, 2018 at 7:00 am
      Francois@1:26PM,
      We in the Southern part of the US are pleased to see “ever” being pronounced
      correctly

      Now if we could just teach them the proper pronunciation of “naked”.

  6. The main reason for the new record appears to be the significant increase in exports of gas compared to a few years ago. Difficult to blame that on the cold weather!

    • That explains most of the breaking of the previous record in 2014. However, domestic consumption was still slightly higher than the 2014 record without exports. The cold is why there was a record weekly draw from storage.

  7. I haven’t the data to back this up but I trust those gas draw figures as a more reliable indicator of January temperatures than any {adjusted} surface thermometer data set. The gas draw represents an average of raw data from a national network of tens of millions of self-calibrating continuously reporting UHI self-correcting analog smart thermometers operating 24/7 and expressed in gas volumes. Way more compelling than a sparse and ill-sited digital thermometer coverage, the output from which is constantly meddled with via. the ideological algorithm du jour.

      • Indeed and many thanks for bringing this nice thing to us. Simple yet powerful thermal analytic technique as an emergent property of large numbers of humans and their use of fossil fuels is both sublimely utilitarian and brutally ironic. Huge grins for it and made my night :).

  8. It’s one of many reasons why we still need coal, to keep price spikes of NG in check, and to provide an alternative.

  9. here in maine distributors also faced a shortage due to rail cars unable to deliver due to lot of snow and the cold temps.

  10. So, let me get this straight:

    -Burning natural gas causes greenhouse gas heating of the earth.
    -Greenhouse gas heating of the earth causes COLDER winters forcing people to burn more natural gas.
    -Burning natural gas causes greenhouse gas heating of the earth.
    -Greenhouse gas heating of the earth causes COLDER winters forcing people to burn more natural gas.
    -Repeat as necessary.

  11. Be careful with all that rejoicing; as you admit, the price spike is ephemeral and regional.

    There hasn’t been a spike on NYMEX:
    https://www.bloomberg.com/energy
    https://www.eia.gov/naturalgas/weekly/archivenew_ngwu/2018/01_04/#tabs-prices-3

    The draw is real.

    Even the nitwits and numbskulls of National Propaganda Radio (a/k/a “NPR”) admit that firewood supplies in Vermont have been depleted.
    https://www.npr.org/2018/01/11/577453517/how-firewood-is-faring-in-vermont-after-severe-cold-spell

    • Not only has firewood been depleted, reserves of oil to fuel the dual burning power plants came close to running out.
      At least 3 ships carrying fuel oil crossed the Atlantic to St. Croix for blending for US plants in the past few days.

      Furthermore, the inaugural LNG shipment from Yamal was offloaded at the UK. Very next day, Engie chartered ship, the LNG Gaselyes, loaded up and is heading for Everett, Massachusetts this very moment.
      Not only is this state of affairs preposterous, it may be illegal as the Russian LNG is under US sanctions.
      BTW, Engie played a major role in stifling the build out of two big gas pipelines into the region.

      • The Gaselys discharged a cargo it had loaded at Sabine Pass at the Grain LNG terminal on 30th December, after the Christophe de Margerie’s visit from Yamal on the 28th/29th. It then stayed there through bad weather until the 7th before leaving for Gibraltar/Algeciras, where it put into port overnight (probably to top up its bunker fuel), before heading across the Atlantic due West, aimed at the mouth of Chesapeake Bay. There is no evidence of backloading of cargo at Grain. Check it out here:

        https://www.nationalgrid.com/uk/gas/market-operations-and-data/transmission-operational-data#tab-1

  12. Well, if the US energy grid completely relied on “renewable energy” (a gullible’s green goal), then there would be fewer of us carbon based life forms left to burn old carbon to stay alive. A Win-Win? For who? Those who don’t practice what they preach?

  13. Just wondering how our energy system would have responded to the latest cold spell if we had been dependent on solar and wind. We don’t hear or read much discussion along those lines.

  14. @François at 1:26pm: The spelling of “ever” as “evah” implies sarcasm. There have been so many proclamations of some event as the “highest/lowest ever” that the term “ever” has lost its intrinsic meaning.

  15. As a former worker of a gas pipeline it is mystifying to see the reactions of the Greener’s and the NIMBY’s when a pipeline company finds a problem or a bottle neck in delivery of their product. As with most commodities it is supply and demand. On a cold day the usage is very high on a gas system so a number of things begin to happen. The usage begins to reduce the pressures on the system by outstripping the supply. The gas buyers of the pipeline try to buy more gas supply above the normal contract so often they are making purchases on the spot market. The price on the spot market begins to rise as a result. The “new” gas is dispatched from the supplier into the system causing the pipeline to start and run all of their compressors to move the extra gas to the customers. This in turn burns more fuel which is a negative in the supply again. If the pipeline finds that there is an area which suffers from low pressure or lack of flow they will study the usage and expected growth to come up with solutions to prevent this from happening in the future. As in the case of a pipeline in New York state it was found that the installation of new peaking Co-Gen’s had an effect to reduce the delivery pressure in the area when the demands were high. The pipeline applied for an upgrade to increase the capacity to the area by installing a new bigger line to reduce this short fall. There was a river crossing needed to make this happen and after many court battles the Greeners and the NIMBY’s shot down the pipeline expansion by getting this critical crossing stopped. So as a result the area still suffers from low pressures and the peaking plant gets curtailed when it is needed most so the residential consumers can heat their homes. This is the new reality for pipelines operating in the world and the normal people suffer as a result. As it stands today just about every energy project has to be run through the courts to get built and that is a major part of the Greener’s game plan to a brighter future without fossil fuels. Make it so expensive that we quit using it.

    • I agree Boris – I wrote this in 2012:

      https://wattsupwiththat.com/2012/09/06/nyt-blames-food-crisis-on-climate-change-hides-plea-to-reduce-government-mandated-burning-of-food-for-fuel/#comment-1072955

      One further point that I first looked into a decade ago:

      [Excerpt]

      Since then I’ve learned that the vital Ogallala aquifer is dropping at an alarming rate in some locations, due to excess withdrawal of water for irrigation – much of it for corn ethanol.

      If the environmental movement truly had the interests of America and the world at heart, they would abandon their fascination with wasteful, inefficient corn ethanol, wind power and solar power, and focus on real environmental problems like vital groundwater conservation.

      However, if one analyses their actions, it is clear that the “greens” are not interested in the environment or the well-being of humankind. Rather, the environment is merely a convenient smokescreen for their far-left political objectives.

  16. Great distillation of events, information, and data. Again, kudos to Dave.

    As for constraints on gas exports, through permitting, regualtion, legislation, or fiat, this is the type of fairyworld, unicorn populist economics that has given us Venezuela and Egypt as the ekonomic powerhouses driving the world economy. (‘k’ included for emphasis ;-) )

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