Viewpoint: California gas tight on low stocks, repairs

The availability of natural gas in southern California will likely remain tight this year amid a series of ongoing pipeline constraints, below-average inventories and the potential for a surge in weather-driven demand over the next few months.

SoCal Gas, which owns and operates the major pipeline system in the region, has been faced with significant planned and unplanned repairs. The company's Line 3000, which runs from the California-Arizona border to Los Angeles, has been out of service since 29 July 2016, while the Line 235-2 near the Newberry compressor station has been out of service since 1 October 2017.

SoCal Gas has said that Line 3000 will return to service in September, but the company has not established a date for Line 235-2's return to service. In a letter to the California Public Utilities Commission (CPUC) on 29 June, SoCal Gas said the Line 3000 project was an "expansive and complex project" that included 246 individual job sites across 125 miles (201km) of challenging terrain. The project is in its second phase.

The company also said it was still working to complete integrity and remediation activities on Line 235-2 following a 1 October leak that led to a rupture and a fire. A metallurgical study determined the underlying cause of the failure was external corrosion. The initial remediation plan requires permitting for six job sites to replace about 3.4 miles of pipe over the next nine months, under a best-case scenario. Upon its eventual completion, the company expects to return Line 235-2 to service at a reduced operating pressure until root-cause recommendations can be fully implemented.

SoCal Gas is also struggling because of limited use of its Aliso Canyon natural gas storage facility, located north of Los Angeles, following a major leak in late 2015. Historically, the maximum amount of gas able to be stored at Aliso Canyon was 86.2 Bcf, but state law now requires the CPUC to determine how much gas can be withdrawn from the facility to ensure safety, reliability and reasonable rates.

In a draft report issued in June, the CPUC recommended increasing storage volumes at Aliso Canyon from the current 24.6 Bcf to 34 Bcf. The increase in storage should allow the system to maintain relatively high injection and withdrawal capacity over a longer period, the report said.

SoCal inventories were 63.1 Bcf on 10 July, nearly 24pc higher than a year earlier but 25pc below the five-year average.

California could face an increased risk of power reserve shortfalls this summer because of below-average hydroelectricity supply, according to the California Independent System Operator (CAISO), leading to greater use of natural gas as a generating fuel.

In its annual summer assessment released in May, the CAISO said that the statewide snow water content for the California mountain regions was at 51pc of average levels as of 2 April. As temperatures continue to ramp up in the southwest, cooling demand should remain elevated and place pressure on gas supplies in the region.

"If the Los Angeles area sees a return to heat, like we saw earlier this month, we would expect cash prices to ratchet up once more," said consultant Nina Fahy with Energy Aspects.

Prices at the SoCal Citygates index, an indicator of gas demand in southern California, averaged $4.95/mmBtu during 1-10 July, up by 53pc from the same period a year ago, and reached an almost five-month high of $8.15/mmBtu on 5 July. The July bid week price averaged $3.94/mmBtu, up by 24pc from the same month a year ago.