Sparks About Gas

Market drivers for an increase in gas storage

 By Nicholas Newman
About gas

Rising market penetration and increasing supplies of gas are making development of new gas storage facilities a priority for many companies…

Gas storage ensures availability, irrespective of the season. It enables ExxonMobil in Texas and OMV in Austria to provide additional gas to meet peak demand and absorb surplus gas production when demand is low. Gazprom’s gas storage facility near St. Petersburg holds gas from Arctic fields destined for European markets. Traders buy gas at low prices in summer and store it for resale at higher prices in winter. Storage facilities come in two main forms. Above ground, gasholders and new LNG terminals and tankers store gas to meet system balancing and peak periods. Underground, depleted oil and gas fields, salt caverns and aquifers meet seasonal needs. France, Germany and Italy can store up to one third of their annual gas demand. Ukraine has the largest gas storage facilities in Europe at 32 billion cubic meters (bcm) compared with the EU’s 146 bcm.

How is natural gas stored? (

In the US, there are over 400 underground storage facilities holding around 110 bcm of gas. Numerically, depleted oil and gas fields account for around 84 percent of storage facilities, aquifers for 9 percent and salt caverns for 7 percent.

Depleted oil and gas fields

Injecting gas into end-of-life gas or oil fields is the most common form of gas storage in use today. Texas is home to numerous depleted oil and gas stores, while in Europe, the UK’s offshore 130 bcm Rough field and the 43 bcm Severo-Stavropolskoye UGS facility in southern Russia stand out. Re-using end-of-life oil and gas fields makes perfect sense. They are well known to geologists and petroleum engineers and require only modification of existing extraction and distribution infrastructure. Consequently, of the three types of underground storage, depleted fields are generally the cheapest and easiest to develop, operate and maintain. In order to maintain working pressures, about 50 percent of the injected gas is kept as cushion gas leaving the remainder to be extracted, as and when required.

Aquifer Storage

Aquifers are natural water reservoirs that can be used for gas storage. For example, Chicago and Los Angeles are supplied with gas-held in aquifers. Aquifers, like depleted fields, can only be injected with gas once a year. Since 80 percent of injected gas is retained as cushion gas there remains just 20 percent to be disgorged. Therefore, aquifers are generally the least desirable and most expensive type of underground gas storage facility and are usually developed for meeting peak needs and when other solutions are not possible.

Salt caverns or formations

Examples of salt caverns acting as gas stores include Mont Belvieu near Houston in Texas, Baumgarten near Vienna and Jintin near Hong Kong. Salt caverns are around one-hundredth the size of a depleted field, too small to meet base load but useful in emergencies, since gas can be injected, withdrawn and replenished quickly and often in a year. Though more costly to construct than conversions of depleted fields, when measured by dollars per thousand cubic feet of working gas, the several withdrawal and injection cycles reduces their effective cost.

LNG Storage

World trade in LNG reached 270 million metric tons in 2016 and is set to rise to 360-370 million tons in 2020 when there will be 200 LNG tankers at sea at any one time storing the equivalent of 40 Bcf/d (billion cubic feet per day). This trend necessitates a commensurate rise in onshore LNG storage tanks which have no requirement for cushion gas. But for now, prime examples of LNG storage include the Isle of Grain facility near London and the GATE Terminal in Rotterdam, which are both located close to major gas markets. Onshore LNG storage tanks provide delivery capacity for on-demand situations such as brokerage fuel and during peak periods when market demand exceeds pipeline capacity. LNG, which is gas stored at -163 °C (-260 °F), occupies about 600 times less space than natural gas and can be delivered to market at short notice by truck, barge or rail car in a virtual pipeline. One distinct benefit of LNG storage tank capacity is that buyers can take advantage of bargains on the spot market. A disadvantage is that they are more expensive to build and maintain than developing new underground storage facilities.


Prospects for new gas storage projects

Countries adopting gas power generation and extending gas markets offer the best prospects. For instance, Mexico is constructing a nationwide gas pipeline network and new gas power plants. With increased reliance on gas comes the need for increased storage. Unfortunately, the best geological position for underground storage is next to the Texas border, too far from major consumption centers like Mexico City, which is located too close to volcanic geology.

South Africa is considering development of a nationwide gas grid to meet rising demand for clean energy. Gas storage facilities could be based at the planned Richards Bay and East London LNG import facilities or alternatively, at the soon-to-close offshore Moss Gas F-A and South Coast Complex gas fields. In the US, burgeoning shale gas supply, pipeline congestion and delays in new pipeline construction capacity restricts the movement of gas supplies to New England’s residential, industrial and power market. However, an above-ground LNG facility at Fields Point in Providence, Rhode Island could help meet winter gas demand in the region. BP’s Energy Outlook predicts that consumption of natural gas will increase by around 1.6 percent a year to 2035, driven by increases in power generation and shifts towards cleaner energy. It is this trend that underpins market prospects for more gas storage facilities.

SEE MORE: Powering the energy storage revolution by Mike Scott

about the author
Nicholas Newman
Freelance energy journalist and copywriter who regularly writes for AFRELEC, Economist, Energy World, EER, Petroleum Review, PGJ, E&P, Oil Review Africa, Oil Review Middle East. Shale Gas Guide.