A major leak detected almost a year ago at the Aliso Canyon natural gas storage facility has resulted in significant volatility in Southern California’s summer gas prices compared to the U.S. benchmark.
The U.S. Energy Information Administration (EIA) attributes the unstable pricing to restrictions on the use of Southern California Gas Co.’s facility following detection of a well failure and leak in late October 2015. The restrictions lowered working gas stock at Aliso to about 15 billion cubic feet (Bcf); its capacity is 86.2 Bcf.
Prices at the Southern California SoCal Citygate hub, which serves the greater Los Angeles area, have veered from a low of $2.32 per million British thermal units (MMBtu) on June 10 to a high of $3.65/MMBtu on July 22 in the June-to-August period.
By contrast, prices at Henry Hub in Louisiana, the U.S. benchmark, peaked at $2.94/MMBtu on July 29. The low for that time frame was $2.26/MMBtu on June 1.
In its Natural Gas Weekly Update, the EIA pointed out that the differences illustrated how local conditions can influence price apart from national trends. The strategic position of Aliso Canyon as a major source of gas for power generation for the country’s second-largest metropolitan area was highlighted when gas could not be withdrawn from storage to meet increased demand stemming from high temperatures.
Aliso Canyon’s underground storage facility is the second-largest natural gas storage field in the western U.S., with 115 wells. In May, California’s Public Utilities Commission declared a moratorium on natural gas injections at the facility until well safety tests are completed.
The EIA expects limitations from Aliso Canyon to remain a factor through the upcoming winter.
Joseph Markman can be reached at jmarkman@hartenergy.com or @JHMarkman.
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