Columbia Gas urges pipeline customers to pick up restocking pace

Reuters

By Eileen O'Grady

HOUSTON, May 9 (Reuters) - The operator one of the largest natural gas pipeline systems in the United States is urging customers to accelerate the pace of rebuilding stocks to ensure sufficient supply to meet heating demand next winter.

Columbia Gas Transmission (TCO), a unit of NiSource Inc , said gas injections on the system in April and early May trailed historical amounts due to heavy withdrawals during the coldest winter in decades, leaving working gas in the system at half the amount it was a year ago.

"This raises concerns about customers expecting to inject at higher rates later in the season," Columbia Gas said in an advisory on May 2. "If the majority of storage customers take this approach, demand for storage injections late in the season may exceed TCO's injection capabilities."

Some analysts are concerned that it will be difficult for utilities and others to rebuild the nation's gas stockpile sufficiently before the next heating season to avoid price spikes when cold weather arrives. Others expect rising gas production to allow storage to refill in time.

"We have just reminded our customers that being at 55-60 percent (of storage contract amounts) by July 1 will help ensure that everyone is on track for next winter," said Columbia spokeswoman Katie Dupuis Martin.

Analysts are closely watching storage levels on pipeline systems operated Columbia, Dominion Resources Inc, ANR Pipeline, a unit of TransCanada Corp and others.

Pipelines commonly post levels of working gas, but Dominion has no plans to issue an advisory similar to Columbia's.

"Our customers have indicated they intend to fill storage as they have done in the past," said Dominion spokesman Frank Mack.

STOCKS NEED TO MORE THAN TRIPLE

Utilities will need to inject more than 13 billion cubic feet of gas per day on average over the summer to rebuild the inventory to the five-year average of 3.8 trillion cubic feet, said the American Gas Association (AGA), a trade group in Washington, D.C.

Net gas injections in recent years have averaged just 10 bcfd, AGA said, but weekly injections are more seasonal in nature.

"Historically, we always put more gas in storage on a weekly basis in May and June than we do in October or later," said Chris McGill, AGA vice president of policy analysis. "When the balloon is less full at the beginning of the injection season, it's not as hard to push the gas in as it is at the end of injection season," McGill said.

Five weeks into injection season, total gas in storage stands at 1.055 tcf, the U.S. Energy Information Administration said on Thursday, or 48 percent below the five-year average.

Analysts polled by Reuters said they expect gas in storage to refill to 3.44 tcf by early November, below the robust 3.8 tcf five-year average due to soaring shale gas production.

Utility officials said they do not dwell on the total gas figure tracked by EIA, they know the amount of stored gas available in November will impact the price they will pay when winter hits.

"Operationally, all (local distribution companies) are going to put gas in storage to be as prepared for the winter as we can be regardless of the national storage picture," said Gerald Ballinger, president of the Public Energy Authority of Kentucky which has about 22 municipal utility members.

Ballinger said having more gas in storage will keep prices lower. "If we don't get to 3.4 (tcf), it could have quite an impact on where prices go." (Editing by Marguerita Choy)

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