SoCalGas has more flexibility in natural gas supply than last winter, according to EIA

Southern California Gas Company (SoCalGas) has more flexibility this year to withdraw natural gas from storage to meet winter demand than it did last year, according to the U.S. Energy Information Administration (EIA).

As of Dec. 10, SoCalGas’s working natural gas inventory totaled 74.4 billion cubic feet (Bcf), which is nearly equal to the year-ago stock level and is nine percent higher than the level in 2017.

However, the California Public Utilities Commission (CPUC) approved new rules in July 2019 that make it easier for SoCalGas to withdraw natural gas from its Aliso Canyon storage facility, which is the largest storage facility available to the company, with authorized working gas storage totaling 34 Bcf. Previously, following the October 2015–February 2016 leak, the CPUC only allowed SoCalGas to withdraw from Aliso Canyon as the last resort.

Also, repairs to Line 235-2 in southeastern California were completed in October 2019. These repairs increased pipeline capacity by 270 million cubic feet per day, increasing access to natural gas from the San Juan Basin and Permian Basin through the Needles and Topock receipt points. Following an October 2017 rupture on the pipeline, Line 235-2 had faced reduced capacity.

According to the National Oceanic and Atmospheric Administration’s winter outlook forecasts, the 2019–2020 winter in Southern California may be warmer and drier than is typical, which would likely reduce natural gas demand in the region.

During last year’s winter, the average natural gas spot price at the SoCalGas Citygatehit a new record of $6.93 per million British thermal units (MMBtu). Due to unusually cold temperatures and supply constraints, daily prices as high as $22.29/MMBtu occurred in February 2019.

This winter, market expectations developed by S&P Global Market Intelligence for the SoCalGas Citygate forecast lower natural gas prices than those of last winter. According to the market expectations, at the SoCalGas Citygate, energy traders value natural gas at $6.66/MMBtu in December 2019. They also indicate a January-March 2020 average price of $4.08/MMBtu, as of Dec. 10.