Natural Gas Coasts Along, while Other Energy Markets Test Rollercoasters

Natural Gas Coasts Along, while Other Energy Markets Test Rollercoasters

August 4, 2015

I do not recall more confusion and misalignment in the energy sector as is happening now. Any correlation and interdependency that existed previously among oil, coal, natural gas, and electricity markets seem to have evaporated; a multiplicity of independent events drive each one in various, sometimes opposing, directions, and who knows how much farther apart from each other they will end up. The power industry goes through the largest ever restructuring process since first setting its pace towards “open competition.” Oil markets touch the barrel’s lowest price. Against this background, natural gas is a well behaving child with low volatility and a bright future (at least as it seems now). And not surprisingly, data reports and data sources supporting each one of these markets are impacted in different ways.

Oil markets are expanding stocks while shrinking human resources and investments. Publications for the oil industry are generously sharing advice from career experts on how to manage or survive layoffs. This is not shocking: announcements from Chevron and Statoil have stated that each is cutting their labor force by 1,500, Centrica by 6,000, Shell by 6,500, and Saipem by 8,800. Slowly sliding into depression, oil folks are firmly residing at the two bottom layers of the Maslow’s pyramid. Such a dismal picture does not leave much room for focusing on data and data management issues.

Electric power markets, on the other hand, seem to have a whole host of open-ended questions on how to manage upcoming challenges in general and data management. The impact from upcoming structural changes in generation mix and increase in distributed generation accompanied by “microgridding” of the distribution system has not been properly assessed and quantified. Meanwhile, we are standing right at the verge of the largest system revamp ever with no clear comprehension of the nature and expanse of these changes. What we know for sure is that there will be new entities, new types of market players, partnerships, and alliances, and behind-the-meter data will be have to be available to the system operators – all of this erasing the borders between transmission and distribution systems. All of these factors will augment complexities in data management faced by any desk dealing with data, whether in analytical, trading, or risk management functions. It is not happening tomorrow. Even though they are of massive proportions, these changes are currently pending and prospective. For now, without clear regulatory direction, electricity markets players are not so sure about the massive data wave that is about to wash away everything they’ve known about data management as it relates to the industry.

Compared to its counterparts, the natural gas market is enjoying peace and quiet with stable prices and no hurricanes in sight. Unconventional gas exploration continues rising. Maybe a bit too much production is taking place though, with more fields entering the production inventories. Not yet facing an oil-like dilemma with supply outpacing demand, natural gas is looking into expanding storage capacities, just in case. These trends are mirrored by natural gas data coverage.

In July only, EIA augmented its reporting in several categories. The most noticeable one is geographic expansion with the addition of monthly natural gas production for ten states. Alaska, Louisiana, New Mexico, Oklahoma, Texas, Wyoming, and the Federal Gulf of Mexico are now joined by Arkansas, California, Colorado, Kansas, Montana, North Dakota, Ohio, Pennsylvania, Utah, and West Virginia. With this change, EIA’s reporting now represents nearly 90% of the total US natural gas production, on a more granular level.

EIA also commenced releasing new data sets on underground natural gas storage. EIA even went into an explanation of the rationale behind reporting base gas levels and the drivers affecting them. Thus, base gas is a certain level of gas, not usually used for commercial purposes, that is required to maintain pressure in reservoir in order to support integrity of facilities. This level varies, depending on the geologic properties of storage facilities. Salt reservoirs can reach 30% of total capacity; in nonsalt reservoirs, 50% of capacity is base gas. The actual base volumes differ from the capacity levels especially for salt facilities, which are more stable and have less stringent requirements. In some cases, base gas can be displaced with liquids or temporarily transferred for engineering reasons. This data is being published now. Furthermore, EIA also promised that later in 2015 other data reports on storage markets will be added to weekly, monthly, and annual publications. As long as unconventional gas recovery revolutionaries remain on the side of peace and quiet without crossing the border that separates abundance from excess, growing storage capacities will likely be the main challenge for them to handle.

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