Editor’s Note: In March 2023, the US Federal Energy Regulatory Commission (FERC) published its 2022 state of the market report. The report, prepared by the Office of Energy Policy and Innovation’s Division of Energy Market Assessments, summarizes key trends in electricity and natural gas markets and notable developments in 2022. What follows in an excerpt from that report.
Natural gas storage inventories help to balance natural gas demand and supply and are fundamental to price formation. Natural gas storage levels have trended downwards over the last three years, with storage levels at the end of withdrawal season falling from 1.98 Tcf (56.06 x 109 m3) in 2020 to 1.38 Tcf (39.07 x 109 m3) in 2022. Comparing the ten-year and five-year averages for the end of withdrawal season, the average for the end of withdrawal season has decreased by approximately 60 Bcf (1.6 x 109 m3). End of withdrawal season storage levels had been on a downward trajectory from 2017 through 2019 but recovered slightly in 2020 during the COVID-19 pandemic. Total withdrawals for winter 2021/2022 equaled 2.26 Tcf (63.9 x 109 m3), 7% above the five-year average and 2% above winter 2020/2021.
Storage levels in the Pacific region reached their highest levels for 2022 in late July/early August of 2022, unlike the rest of the United States which peaked in November. This was due to a heat wave that the Pacific Northwest experienced in late August. Storage levels did not recover to their previous levels after the withdrawal in August. At the beginning of November 2022, storage levels in the Pacific region were 15% below the five-year average for that time of year. By the last week of December, storage levels in the Pacific region were 33% below the five-year average for that time of year. Adding to low storage levels in the Pacific region was the reclassification of 51 Bcf (1.4 x 109 m3) of working gas to base gas in Pacific Gas and Electric that occurred in June of 2021.
Underground storage inventories finished the withdrawal season in April 2022 at 1.38 Tcf (39.07 x 109 m3), 253 Bcf (7.1 x 109 m3) or 15% below the five-year average. Injections — defined as the difference between the lowest and highest amounts of natural gas in storage in a calendar year — for 2022 equaled 2.26 Tcf (63.9 x 109 m3), 19% above 2021 injection levels. In November 2022, at the beginning of the 2022-2023 withdrawal season, natural gas storage levels were at 3.64 Tcf (1.03 x 1011 m3), which is 30 Bcf (849.5 x 106 m3) or 1% below the five-year average. Natural gas storage levels finished the 2022 calendar year at 2.89 Tcf (81.83 x 109 m3), representing 753 Bcf (21.32 x 109 m3) in withdrawals through the first two months of the 2022/2023 withdrawal season.
Little new natural gas storage capacity under FERC jurisdiction has begun service in more than a decade. In 2022, FERC certificated a project in Louisiana with 20 Bcf (566.3 x 106 m3) storage capacity which will be the first significant addition in natural gas storage since the 2010s when it becomes operational in 2024. Significant buildout of natural gas storage capacity has not been observed since the first half of the 2010s — this buildout helped reduce large seasonal price swings that were common before wide-scale extraction of shale natural gas in the United States began in the late 2000s. Reduced reliance on storage as a source of supply during periods of elevated demand, due to higher levels of natural gas production in close proximity to consuming markets in the Northeast and Midwest, and the lower seasonal difference between the price of winter and summer natural gas have contributed to less need for incremental natural gas storage capacity.
