U.S. Weekly U.S. Weekly Natural Gas Storage DataNatural Gas Storage Data

United States – European Meetings to Discuss Oil and Natural Gas Data

September 28, 2007

William TrapmannNatural Gas Analysis Team LeaderWilliam.trapmann@eia.doe.gov

www.eia.doe.gov

Presentation Topics Presentation Topics

•The Role of Storage in the Natural Gas Market

•Natural Gas Storage

•EIA’s Weekly Natural Gas Storage Data Project

•Major Issues Related to WNGSR

•WNGSR Performance

•The Role of Weekly Natural Gas Storage DataThe Role of Weekly Natural Gas Storage Data

•Weekly Natural Gas Storage Data IssuesWeekly Natural Gas Storage Data Issues

The Role of Storage in the The Role of Storage in the Natural Gas MarketNatural Gas Market

U.S. Gas Industry at a GlanceU.S. Gas Industry at a Glance

IndustryIndustry SegmentSegment ParticipantsParticipants Regulatory AuthorityRegulatory Authority

ProducersProducers

Gathering SystemsGathering Systems

6,800 U.S. oil/ gas companies;6,800 U.S. oil/ gas companies;

21 majors; 300,000+ wells21 majors; 300,000+ wells

130+ systems130+ systems

Price decontrol completed by Price decontrol completed by 1/1/93 under the Wellhead 1/1/93 under the Wellhead Decontrol ActDecontrol Act

State Regulatory Commissions State Regulatory Commissions or FERCor FERC

Interstate PipelinesInterstate Pipelines 90 majors, 109+ total90 majors, 109+ total FERCFERC

Intrastate PipelinesIntrastate Pipelines 100+100+ State Regulatory CommissionsState Regulatory Commissions

Local Gas UtilitiesLocal Gas Utilities 1,5001,500 State Regulatory CommissionsState Regulatory Commissions

MarketersMarketers about 300about 300 UnregulatedUnregulated

Natural Gas Storage Natural Gas Storage Underground: 133 operators Underground: 133 operators (390+ Fields); LNG storage 71 (390+ Fields); LNG storage 71 operators (roughly 100 sites)operators (roughly 100 sites)

FERC if part of interstate FERC if part of interstate system, State Regulatory system, State Regulatory Commissions for othersCommissions for others

Gas ConsumersGas Consumers Residential 63.6 millionResidential 63.6 million

Commercial 5.2 millionCommercial 5.2 million

Industrial 205,000Industrial 205,000

Electric GeneratorsElectric Generators: 670 plants : 670 plants gas firedgas fired

Interstate commerce – FERCInterstate commerce – FERC

Intrastate commerce – State Intrastate commerce – State CommissionsCommissions

Natural Gas Data Surveys and the Industry Natural Gas Data Surveys and the Industry

EIA-912

Weekly Underground Storage Report

EIA-914EIA-895

Production Basin

Pipeline Capacity

Source: Energy Information Administration, GasTran Gas Transportation Information System

Producing Basins and Regional Producing Basins and Regional Natural Gas FlowsNatural Gas Flows

0100200300400500600700800900

1,000

Jan-0

4

Apr-04

Jul-0

4

Oct-0

4

Jan-0

5

Apr-05

Jul-0

5

Oct-0

5

Jan-0

6

Apr-06

Jul-0

6

Oct-0

6

Jan-0

7

Apr-07

Electric Power

Gas Demand Varies Seasonally During the YearGas Demand Varies Seasonally During the Year(Billion Cubic Feet per Month)(Billion Cubic Feet per Month)

0100200300400500600700800900

1,000

Jan-

04

Apr-04

Jul-0

4

Oct

-04

Jan-

05

Apr-05

Jul-0

5

Oct

-05

Jan-

06

Apr-06

Jul-0

6

Oct

-06

Jan-

07

Apr-07

Jan-0

4

Apr-04

Jul-0

4

Oct-0

4

Jan-0

5

Apr-05

Jul-0

5

Oct-0

5

Jan-0

6

Apr-06

Jul-0

6

Oct-0

6

Jan-0

7

Apr-07

Jan-0

4

Apr-04

Jul-0

4

Oct-0

4

Jan-0

5

Apr-05

Jul-0

5

Oct-0

5

Jan-0

6

Apr-06

Jul-0

6

Oct-0

6

Jan-0

7

Apr-07

Source: Monthly Energy Review, August 2007

Residential

Industrial

Commercial

Monthly Consumption, Production and Net ImportsMonthly Consumption, Production and Net Imports

0

10

20

30

40

50

60

70

80

90

100

Ja

n-0

1

Ju

n-0

1

No

v-0

1

Ap

r-0

2

Se

p-0

2

Feb

-03

Ju

l-03

De

c-0

3

May-0

4

Oc

t-0

4

Ma

r-0

5

Au

g-0

5

Ja

n-0

6

Ju

n-0

6

No

v-0

6

Ap

r-0

7

Se

p-0

7

Feb

-08

Ju

l-08

De

c-0

8

Billio

n C

ub

ic F

eet

per

Day

0

10

20

30

40

50

60

70

80

90

100

Consumption

Net Imports

ProductionConsumption

Total

Tcf

Daily

Bcf/d

2006 21.82 59.8

2007 22.69 62.2

2008 22.98 62.7Projection

Source: EIA, Short-Term Energy Outlook, August 2007

History

Natural Gas StorageNatural Gas Storage

Source: PB-KBB Inc

B

A

CD

E

Underground Storage: A. Salt Caverns B. Mines C. Aquifers D. Depleted Reservoirs E. Hard-rock Caverns

Storage Reservoirs by Type

Total Capacity: maximum volume of gas that can be stored in a storage facility, determined by the physical characteristics of the reservoir.

Base Gas: volume of gas needed as permanent inventory in a storage reservoir to maintain adequate pressure and deliverability rates throughout the withdrawal season.

Working Gas: volume of gas in the reservoir above the designated level of the base gas. It is gas that is temporarily stored in a reservoir with the purpose of being withdrawn at a future date.

Storage Terms

Note: Aquifers in the Producing Region have been displayed as depleted oil/gas fields to preserve data confidentiality.

Consuming West Consuming East

Depleted FieldsSalt CavernsAquifers

Producing

Underground Natural Gas Storage Facilities in Underground Natural Gas Storage Facilities in the Lower 48 Statesthe Lower 48 States

• Critical supply component during heating season

• Smoothes domestic production of gas throughout the year by enabling storage refill during periods of low demand

• Withdrawals help satisfy sudden increases in demand or supply declines caused by weather or other factors

• Support pipeline and hub operations—e.g., peak day service and load balancing

Natural Gas Storage

0

1,000

2,000

3,000

1/7

/05

4/7

/05

7/7

/05

10

/7/0

5

1/7

/06

4/7

/06

7/7

/06

10

/7/0

6

1/7

/07

4/7

/07

7/7

/07

Bil

lio

n C

ub

ic F

ee

t

Current Natural Gas Stocks Remain Above Current Natural Gas Stocks Remain Above The 5-Year RangeThe 5-Year Range

Working Natural Gas Stocks

Note: The shaded area represents the minimum and maximum values from 2002-2006.

Source: Energy Information Administration, Weekly Natural Gas Storage Report.

EIA’s Weekly Natural Gas EIA’s Weekly Natural Gas Storage ProjectStorage Project

EIA Weekly Storage SurveyEIA Weekly Storage Survey

• Objective: to provide weekly estimates of natural gas stocks for the Nation and by region

• Form EIA-912, “Weekly Underground Natural Gas Storage Report”

• Response is mandatory under Federal law

• Collect working gas in storage by company by three regions

• Sample survey – currently about 65 respondents drawn from EIA-191 census survey population

• Sample drawn such that the standard error would be no more than 5 percent for any region or the total

• Volume coverage is at least 90 percent in each region

• Forms due by 5:00 p.m. Monday for previous Friday

• Primary dissemination via Internet posting

Development Project MilestonesDevelopment Project Milestones

•October 2001: Project begins

•November: Working meetings with AGA

•December: Submit clearance package to OMB

•January 2002: OMB clearance

•Feb/Mar: System development and testing• Sample design and selection• Notification of respondents

•April: Operational testing

•May: Initial data releaseMethodology ReportComparative Assessment Report

WNGSR Project ChronologyWNGSR Project Chronology

• May 9, 2002: First release of WNGSR

• May-July 2002: Revisions occur in 5 of the first 10 weeks

• November 2002: Federal Register notice (FRN) to announce revision policy

• October 2003: Methodology change

• July 2004: New sample

• November 2004: Large revision (the perfect storm)

• April 2005: FRN to announce new revision policy

• May 2005: New revision policy takes effect

• August 2005: Methodology change

• Sept 2007: WNGSR accepted by OMB as a Principal Economic Indicator for 2008

• Sept 2007: EIA announces redesign and new release procedure for WNGSR

Major Issues Related to WNGSRMajor Issues Related to WNGSR

•Security issues

•Operational procedures and issues

•Release time and day

•Revision policy

•Data quality

Security Is a Dominant Factor Security Is a Dominant Factor

• The storage data are highly sensitive given their timely nature and commercial value

•All compilation and processing are conducted in a secure work room

•Data collection – data are collected under the Confidential Information Protection and Statistical Efficiency Act (CIPSEA)

• No disclosure of individual company identification or data – except with consent of the companies

•Standard distribution is limited to team members only

• Conforms to policies established by the Office of Management and Budget for Principal Economic Indicators

Operational Procedures and Issues Focus on Operational Procedures and Issues Focus on Timeliness, Quality, and Security Timeliness, Quality, and Security

•Survey forms are collected via FAX or e-mail (written copies are essential)

• Initial quality checks on data

•Estimation meeting on the day prior to release – includes rigorous quality checks

•Non-response by sample companies – imputation

•Questionable/suspect data are identified for followup

•Estimates are established on the day prior to release

•Pre-release status check

•Release – secure delivery of files for posting

Release Time and Day Were Established Release Time and Day Were Established To Accommodate Various InterestsTo Accommodate Various Interests

•Standard release: 10:30 a.m. on Thursday

•Occurs during floor trading on the New York Mercantile Exchange (NYMEX)

•Before the end of spot trading for the day (approximately 12:30 p.m. Eastern Time)

Public Comments Were Received Prior Public Comments Were Received Prior To Establishing the Revision PolicyTo Establishing the Revision Policy

•Revisions to previously published data may occur for various reasons including resubmissions from respondents and late submissions from respondents

•Changes that total 7 billion cubic feet (Bcf) [about 200 million cubic meters (mcm)] or more for any region or total Lower 48 States trigger a revision

•All revisions to date have been reported in the next scheduled release

•Changes of 10 Bcf [about 283 mcm] or more can trigger an out-of-cycle release – this policy became effective on May 19, 2005

Data Quality Is an Ongoing ConcernData Quality Is an Ongoing Concern

•The weekly natural gas storage data are subjected to considerable scrutiny by EIA – submissions are evaluated with respect to individual company trends and relative to other companies

•Other relevant information such as weather reports and expectations of others are considered also

•EIA continually monitors survey performance

•Weekly, monthly, and annual storage data are compared with respect to anomalous patterns or inconsistent results—e.g., stocks exceeding capacity

WNGSR PerformanceWNGSR Performance

Natural Gas Stocks Are Estimated With Natural Gas Stocks Are Estimated With A Relatively Small Sampling ErrorA Relatively Small Sampling Error

Note: Coefficient of variation equals the ratio of the standard error divided by the mean.

Source: Energy Information Administration, Weekly Natural Gas Storage Report.

Month Mean Standard ErrorCoefficient of

Variation

July-06 3311 59 1.79%

August-06 3435 61 1.77%

September-06 3226 54 1.69%

October-06 3065 53 1.72%

November-06 2561 42 1.66%

December-06 1622 26 1.59%

January-07 1512 24 1.58%

February-07 1746 28 1.63%

March-07 2162 35 1.63%

April-07 2522 41 1.62%

May-07 2839 45 1.59%

June-07 2968 44 1.49%

EIA Monthly Storage SurveyEIA Monthly Storage Survey

•Form EIA-191, “Monthly Underground Gas Storage Report”

•Census survey, not a sample

•Reported by storage operators

•Almost 400 individual underground storage fields

•Approximately 2-month lag from report month to publication

•Provides the population frame for the weekly sample

Volume Differences Between Weekly Volume Differences Between Weekly and Monthly Natural Gas Storage Dataand Monthly Natural Gas Storage Data

-100

-80

-60

-40

-20

0

20

40

60

Ma

y-0

2

Au

g-0

2

No

v-0

2

Fe

b-0

3

Ma

y-0

3

Au

g-0

3

No

v-0

3

Fe

b-0

4

Ma

y-0

4

Au

g-0

4

No

v-0

4

Fe

b-0

5

Ma

y-0

5

Au

g-0

5

No

v-0

5

Fe

b-0

6

Ma

y-0

6

Au

g-0

6

No

v-0

6

Fe

b-0

7

Ma

y-0

7

Bil

lio

n C

ub

ic F

eet

Source: EIA, Natural Gas Division.

Percentage Differences Between the Weekly Percentage Differences Between the Weekly and Monthly Natural Gas Storage Dataand Monthly Natural Gas Storage Data

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Ma

y-0

2

Au

g-0

2

No

v-0

2

Fe

b-0

3

Ma

y-0

3

Au

g-0

3

No

v-0

3

Fe

b-0

4

Ma

y-0

4

Au

g-0

4

No

v-0

4

Fe

b-0

5

Ma

y-0

5

Au

g-0

5

No

v-0

5

Fe

b-0

6

Ma

y-0

6

Au

g-0

6

No

v-0

6

Fe

b-0

7

Ma

y-0

7

Per

cen

tag

e D

iffe

ren

ce

Source: EIA, Natural Gas Division.

The Role of Weekly Natural The Role of Weekly Natural Gas Storage Data Gas Storage Data

Weekly Natural Gas Storage Data Serves Weekly Natural Gas Storage Data Serves A Number of Roles in the IndustryA Number of Roles in the Industry

•Storage operators and others in the industry rely on the weekly data to understand the status of this critical supply element

• Industry analysts use weekly storage as an indicator of relative supply and demand

•Financial traders use the information to establish their trading positions

Weekly Natural Gas Storage Data Can Have a Weekly Natural Gas Storage Data Can Have a Significant Impact on TradingSignificant Impact on Trading

Source: INO.com

EIA released the WNGSR at 10:30

Weekly Natural Gas Storage Weekly Natural Gas Storage Data IssuesData Issues

EIA Provides as Much Data As Possible EIA Provides as Much Data As Possible Without Disclosing Company DataWithout Disclosing Company Data

•Release schedule

•Methodology documentation

•Historical data: weekly stock data and 5-year statistics

•Revision policy

•Comparison of weekly and monthly data

•Background information on storage

How “Full” Is Storage?How “Full” Is Storage?Not a Straightforward ConceptNot a Straightforward Concept

•There are at least three ways to measure full, and each yields a different value

•One can measure full as working gas stocks as a percentage of

– Design capacity

– Working gas capacity

– Historical maxima

•EIA does not report a measure of “full”

•EIA has published a report with a “conservative” estimate of useable storage capacity

Methodology:Methodology:Estimation and Quality IssuesEstimation and Quality Issues

•Extrapolation method: the sum of working gas reported by respondents multiplied by a scale factor

•Refined extrapolation method (Oct-03): similar to the first method, but certain respondent companies were not included in the extrapolation

•Model-based method (Aug-05): Non-respondent companies are estimated on an individual company basis based on recent monthly stocks and individual company measure of variation

•The methodology documentation is located at: http://tonto.eia.doe.gov/oog/info/ngs/methodology.html.

www.eia.doe.gov

www.eia.doe.gov