A LOOK AT UNDERGROUND NATURAL GAS STORAGE

Copyright © 2016 ALL Consulting

A LOOK AT UNDERGROUND NATURAL GAS STORAGE

OPERATION AND REGULATION IN THE UNITED STATES

Presented by: Nate Alleman

Presented at:

GWPC 2016 UIC Conference

Denver, CO

February 25, 2016

OUTLINE

Introduction What is underground gas storage?

Why do we need underground storage?

History

Natural Gas Trends

How is Gas Stored Underground Operation Basics

Types of Gas Storage

Risks and Regulation

2Copyright © 2016 ALL Consulting

INTRODUCTION


WHAT IS UNDERGROUND GAS STORAGE?

Purpose: Storage fields act as underground warehouses that allow consumers to have a steady supply of natural gas year-round without interruption.

Need:

Balance a variable demand with a near-constant supply.

Quicker delivery

Handle supply interruptions.

Take advantage of expected price changes.


Approximately 20% of all natural gas consumed during the five-month winter heating season is supplied by underground gas storage.

HISTORY


First successful gas storage project completed in 1915 in Ontario in an operating gas field.

Following year, operations began in the Zoar field (depleted reservoir) near Buffalo, NY.

The U.S. has 400 underground gas storage projects – more than any other country.

NATURAL GAS DEMAND

Natural Gas Uses

Vehicle Fuel

Residential

Commercial

Electric Power

6

0

5

10

15

20

25

30

1950

1955

196

0

196

5

1970

1975

198

0

198

5

199

0

199

5

20

00

20

05

20

10

Nat

ura

l Gas

Co

nsu

mp

tio

n (t

cf)

U.S. Natural Gas Consumption

40% increase since 1990

Source: EIA 2014


U.S. ELECTRICITY GENERATION BY FUEL

0

20

40

60

80

100

120

140

160

180

200

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Ele

ctri

city

Gen

erat

ion

(m

illio

n k

wh

)

Coal Natural Gas Nuclear Hydroelectric Wind Solar

Source: EIA 2016 7Copyright © 2016 ALL Consulting

Natural gas use for electric generation up 56% since 2000

HOW IS GAS STORED UNDERGROUND?


OPERATION BASICS

Method: Gas injected and stored under pressure so it can be with withdrawn as needed. Injection/Withdrawal Wells

Observation Wells

Cushion (Base) Gas Stored and native gas needed as a

permanent inventory in a storage reservoir to maintain adequate reservoir pressure and deliverability rates.

Working Gas Volume of gas above the designed

volume of cushion gas.

Storage Cycling


Yaggy Storage Well S-1 - KS

U.S. GAS STORAGE VOLUMES

199

0

199

5

20

00

20

05

20

10

20

15

0

1

2

3

4

5

6

7

8

9

10

Nat

ura

l Gas

Vo

lum

e (T

CF

)


Total Capacity Source: EIA 2015

Since 2000: Total Capacity 12%, Working Gas 22%

WHAT MAKES A GOOD STORAGE FACILITY?

Geography & Geology

Geography Near consuming regions or industry (natural gas-fired power plants).

Close to pipelines and distribution systems.

Geology Porosity – how much volume can be stored.

Permeability – determines the rate at which natural gas may be injected or withdrawn.

Confinement – ability to hold gas in the reservoir.

Underground Storage Types Depleted Oil and Gas Fields

Aquifers

Salt Caverns


DEPLETED OIL AND GAS FIELDS

12

Utilizes reservoirs from which gas or oil has previously been produced.

Cheap:

Existing Infrastructure

Known Geologic Characteristics

Moderate cushion gas requirement (≈50%)

Moderate Deliverability

Long Cycle (70-200 days)

Water

Depleted Reservoir

Injection/Withdrawal Wells

Observation Well


Source: ALL Consulting 2016

AQUIFER STORAGE

Uses overlying formation and groundwater as confinement.

More Expensive:

Geologic characterization needed prior to storage.

Inject Cushion Gas

High cushion gas requirement (≈50-80%)

Moderate Deliverability

Long Cycle (70-200 days)

13

Water Water

Gas

Water

Injection/Withdrawal Well

Observation Wells


Source: ALL 2016


SALT CAVERN STORAGE

14

Formation

Salt

Cavern

Confining

Dome

Bedded Salt

Cavern

Salt domes and bedded salts.

Most Expensive:

Solution Mining

New Infrastructure

Small cushion gas requirement (≈20-30%).

High deliverability.

Short Cycle (10-20 days)



UNDERGROUND STORAGE LOCATIONS

Salt Cavern

Aquifer

Depleted Reservoir

15

Source: EIA 2015


INTRASTATE VS INTERSTATE

16

Intrastate208

Interstate192

Intrastate facilities represent 52% of

underground storage facilities.

Number of Facilities

Interstate facilities represent 59% of working gas capacity


FACILITY COUNT


TOTAL WORKING GAS CAPACITY


RISKS AND REGULATION


OPERATION RISKS

20

Casing or cement failure due to: cracks,

corrosion,

damage during maintenance activities,

natural events.

Leaks in wellhead and surface pipe.

Issues at surface facilities.

Migration of gas out of the reservoir through confining layers. Faulting in caprock

Migration through artificial penetrations

Unexpected enlargement of salt cavern Brine compensated operation


ALISO CANYON

Location: Los Angeles, CA Largest underground natural gas storage

facility in California and 4th largest in the U.S. (Working Gas)

Date: October 2015

Incident: gas leak resulting in 4,400 households being evacuated.

Cause: Casing failure Drilled in 1953, converted to gas storage

well in 1972.

Solution: Well killed in February after 3 months.

Volume Released: ≈ 5 bcf21

Source: EDF


MOSS BLUFF STORAGE FACILITY

Location: Liberty County, TX

Date: August 2004

Incident: Explosion and wellhead fire

Cause: Separation of the production casing inside the cavern,

Breach of the 8-inch brine piping above ground, and

Leak between master valve and emergency shut-off on wellhead.

Solution: Fire extinguished after 6.5 days and replacement valve installed.

Volume Released: 6 bcf


YAGGY STORAGE FIELD

Location: Hutchinson, KS (salt cavern)

Date: January 2001

Incident: Explosions due to natural gas migrating underground and into abandoned wells.

Cause: Wellbore failure

Solution: Seal cavern, relieve pressure, plug abandoned wells

Volume Released: 143 mmcf


REGULATION OVERVIEW

Intrastate vs Interstate FERC is the regulatory agency for Interstate facilities.

States generally regulate intrastate facilities within their boundaries.

Intrastate Regulatory Authority Oil and Gas Departments

wells reservoirs

Utility Commissions: Surface facilities

Transmission Lines

Pricing


REGULATORY PROGRAMS

Regulatory Aspects

Internal Mechanical Integrity

External Mechanical Integrity

Pressure Monitoring

Corrosion Control

Wellhead Configuration

Inspections/Testing

Contingency/Emergency Plans


Reporting and Enforcement

CURRENT REGULATORY EFFORTS

States reviewing and revising regulations.

API RP’s 1170 and 1171 (September 2015)

U.S. Senate SAFE PIPES Act (December 2015) Directed PHMSA to promulgate nationwide minimum standards

for management of underground storage.

Could potentially result in the API RPs being the required national standard.

PHMSA Advisory Bulletin (February 2016) Reminder for operators to review operations and identify

potential leaks and failures.

Mechanical Integrity

Monitoring and Inspections, etc.

Encourages operators to voluntarily implement API RPs.

26

CONTACT INFORMATION

Nathan Alleman; J. Daniel Arthur, P.E., SPEC; Tom Tomastik; and Kris Andersen (ALL Consulting). “A Look at Underground Natural Gas Storage Operation and Regulation in the United States”. Presented at the GWPC 2016 UIC Conference. Denver, CO. February 25, 2016.

CITATION INFORMATION:

Nate AllemanALL ConsultingO: [email protected]


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A LOOK AT UNDERGROUND NATURAL GAS STORAGE