Falcon: Gas Storage, Transmission Lines a Hotbed of Activity

By Stell, Jeannie

Gas storage and transmission are a hot bed of activity now, according to John Holcomb, vice president of marketing for Houston- based Falcon Gas Storage Co. Inc. In 2000, Falcon bought a depleted oil and gas reservoir, now known as the Worsham-Steed storage facility, near large gas reserves in the Barnett shale.

“We bought that facility, then the Barnett shale started taking off,” he told members of the Gas Processors Association at their recent annual meeting.

“As we repressurized the depleted reservoir to its original pressure, we started making oil and we also got enriched Btu gas. There we were, stuck with no pipeline capacity for our residue gas. So we built a pipeline, starting flowing gas in October, and we are in business with both of those facilities.”

Falcon’s new 63-mile, 24-inch pipeline primarily serves its expanded 25-billion-cubic-foot-working-capacity Worsham-Steed storage facility in the western portion of the prolific Bamett play in North Texas. It moves 450 million cubic feet of gas per day from the Worsham-Steed facility in Jack County, Texas, to dual interconnections with the North Texas Pipeline and the Atmos Line.

“The need for gas storage is growing, but yet, in the last 10 to 15 years, we’ve had a fall-off of development. That’s one reason the storage and transmission business is a hotbed of activity now, because we are trying to catch up.”

Coal plants are being cancelled, and “our generation says no nuke” so gas is the answer to the evergrowing demand for heating and power, he said.

“The key is, gas demand is extremely volatile. We have swings from one season to the next of 30-to 40 billion cubic feet per day. Where are you going to put that gas? You’re going to put it in the ground.”

Gas-storage operators think the unconventional gas plays in the Rockies and elsewhere are “a must-flow.” Operators don’t want to shut-in the wells, or stop producing the gas liquids that also generate revenue. In April, when demand falls off. gas producers are forced to put their gas into storage.

Liquefied natural gas (LNG) will also be looking for a home in the U.S., he said. In Europe, in the spring, gas prices are relatively low compared with winter, and there is limited storage there. Meanwhile, prices can be incrementally higher in the U.S. during that time, which attracts shipments of LNG. But those shipments must be stored until demand and prices are higher in the winter-heating or summer-cooling seasons.

Gas-storage facilities are being built to accommodate those LNG shipments.

The U.S. is “going to be an LNG dumping ground,” he said. New storage facilities, in the forms of depleted gas reservoirs and hollowed-out salt domes are under consideration for conversion into new storage facilities anywhere in the U.S. that these geological structures exist.

There is also very high activity in transmission-line construction. “Back in the 1990s, for every five large gas- transmission pipeline projects that were announced, one project got built. For every five projects that are announced now, it seems that all of them are getting built.

“Gas-storage development, located along these pipelines, will be used to balance the flow and steady gas supplies against erratic and volatile demand profiles.”

-Jeannie Stell

Copyright Hart Energy Publishing, LP Jan 2008

(c) 2008 Oil & Gas Investor. Provided by ProQuest Information and Learning. All rights Reserved.