Bentek
SoCal demand this summer is projected to exceed the five-year high, sustaining regional natural gas price premiums

Friday, April 27, 2012

BENTEK expects higher-than-normal natural gas demand to keep SoCal gas prices among the highest in the U.S. this summer. Generation capacity from nuclear and hydroelectric sources in California has been reduced significantly this year, and in April MTD is down more than 4,500 MW or approximately 10% of projected peak summer load. BENTEK's California/Southwest Observer reports nuclear and hydroelectric output is down, with generation in April off 56% and 43% from 2011 levels, respectively.

These declines are due to a long-term outage at the San Onofre Nuclear Generating Station (SONGS) that began in January, and significantly below-normal winter precipitation levels across the Sierras. As a result, BENTEK expects regional gas-fired generation to incrementally increase 200 MMcf/d in the SoCal market alone until August when SONGS is estimated to return to service, according to IIR data. Based on this structural shift in power demand combined with an expected reversion to normal demand, BENTEK's projection for SoCal summer demand exceeds the five-year high for natural gas power demand in three of the next four months.

Given that several key pipelines serving SoCal and the California/Southwest market are running at capacity, BENTEK expects California natural gas supply and storage injections will be pressured to meet local power demand, along with power imports this summer. As these trends continue, SoCal and PG&E natural gas prices will experience upward pressure and are projected to remain among the highest in the U.S., especially as temperatures this summer are expected to be higher than last year.

The California/Southwest Observer will continue to provide ongoing analysis on the following market developments:

• Structural increases in gas-fired demand from power due to the SONGS outage require up to 10% higher SoCal sendout into Q3 2012.

• Reversion to the five-year normal demand on higher temperatures and lower hydroelectricity in the California/Southwest region would increase demand from power by 20% over the summer.

• SoCal storage surplus of 27 Bcf relative to the five-year average translates to a 0.3 Bcf/d buffer against incremental demand through the end of July.

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BENTEK's Pacific Northwest Observer focuses on hydroelectric power and how it interacts with regional natural gas supply and demand. Incorporating hydro flow data, power generation and load, as well as natural gas flow data, the Pacific Northwest Observer provides a detailed picture of the integrated power and gas marketplace.

BENTEK's Cell Model database balances supply, demand and storage on a region-by-region basis and provides new visibility into the movement of natural gas in the U.S.

To learn more, please contact your BENTEK sales representative or call BENTEK Sales at 1-888-251-1264.